TODD vs Lady Bird Deeds | Texas Estate and Probate Lawyers

Texas estate planning becomes easier once you understand the key differences between a transfer on death deed (TODD) and a lady bird deed. These tools can save you from a lengthy and expensive probate process. You can transfer real property to your beneficiaries and still maintain complete control during your lifetime.

Texas law authorizes a transfer on death deed that functions much like a payable on death designation on a bank account. A Lady Bird Deed has been recognized under Texas case law for decades and creates an enhanced life estate that allows the owner to retain full control of the property. Both options can help protect a home from Medicaid estate recovery and limit creditor claims after death.

Your situation’s specific needs should guide your choice between these deeds. Factors such as power of attorney authority, revocability, and the specific legal protections of each option all play an important role. At Texas Estate & Probate Lawyers, we understand that deciding which deed is right for you can feel unclear.

In this article, we break down how each option works under Texas law so you can make a more informed decision about your estate plan.

What is a Lady Bird Deed and a TODD?

Estate planning in Texas gives you several tools to transfer property without court intervention. Two options stand out because of their benefits and practical uses.

Definition of a Lady Bird Deed

A Lady Bird Deed (formally called an Enhanced Life Estate Deed) lets property owners keep complete control of their real estate throughout their lifetime. A Lady Bird Deed creates a special mix of present and future interests, unlike traditional deeds. You retain control to live on, sell, mortgage, or even revoke the deed completely without asking beneficiaries. This means you have more control compared to standard life estate deeds. Texas recognizes Lady Bird Deeds through case law rather than specific statutes.

Definition of a Transfer on Death Deed (TODD)

The Texas Estates Code Chapter 114 gives statutory authority to Transfer on Death Deeds. A TODD works just like a payable-on-death designation on your bank account and lets you name specific beneficiaries who get your property when you pass away. You must record the deed with the county clerk before death to make the transfer work. You keep all ownership rights during your lifetime, and beneficiaries can't claim anything until after you're gone.

How both deeds avoid probate

The most important advantage of these deed types is that they skip the probate process entirely. Probate needs court supervision to distribute property and often becomes expensive with attorney fees and court costs coming from your estate. Your property transfers right away to your chosen beneficiaries when you die, so courts don't need to get involved. This quick transfer saves your family time, money, and stress during a tough time. On top of that, it protects your property from creditors who might try to claim against your estate after death.

Differences Between TODD and Lady Bird Deed

Learning the basic differences between a TODD and Lady Bird Deed will help you make better estate planning decisions. These two tools work differently and can affect your situation in several ways.

Legal authority: Statutory vs. common law

Texas Estates Code Chapter 114 explicitly authorizes Transfer on Death Deeds and provides specific guidelines. Lady Bird Deeds get their validity from common law and customary practice instead of direct legislation. Courts and title companies use this difference when they interpret these documents.

Control and revocability during lifetime

Both deeds let you keep control of your property while you're alive, but Lady Bird Deeds give you more options. You can sell, mortgage, or lease the property without involving beneficiaries. You can revoke both types of deeds and change your property distribution plans as your situation changes.

Use of power of attorney

A key difference is that only property owners can execute a Transfer on Death Deed and never through a power of attorney. An authorized agent can create Lady Bird Deeds under a properly drafted power of attorney. This makes Lady Bird Deeds valuable, especially when you have concerns about potential incapacity.

Title warranty and insurability

Texas TODD statute doesn't allow warranty of title provisions. The statute voids such language even if it appears in the deed. Lady Bird Deeds have no such limits and can include warranty provisions that extend title insurance protection to beneficiaries.

Alternate beneficiaries and survivorship rights

TODD beneficiaries get equal and undivided shares with no right of survivorship. TODDs also require beneficiaries to live at least five days longer than the owner due to a 120-hour survivorship rule. Lady Bird Deeds are more flexible and let you specify unequal percentage interests and alternate beneficiaries.

Legal and Financial Implications

The legal and financial effects of todd and lady bird deeds deserve careful thought beyond their ability to avoid probate.

How These Deeds Affect Medicaid Estate Recovery

Texas Medicaid Estate Recovery Program (MERP) cannot claim properties transferred through these deeds. The law allows MERP to collect only from assets that go through probate in Texas. The property passes directly to beneficiaries at the time a Medicaid recipient dies. This places it out of the state's reach to recover long-term care costs.

Dealing With Creditor Claims After Death

These deeds handle creditor access differently after death. Creditors can claim TODD properties for two years after the owner's death. The personal representative can reclaim property if the estate lacks enough assets to pay debts. Lady Bird Deeds work differently. They don't have this statutory recovery period. This creates a smoother property transfer for beneficiaries.

Divorce and Deed Validity

A divorce decree automatically cancels your spouse's beneficiary status in a TODD. Divorce alone doesn't invalidate Lady Bird Deeds. The property stays with titled owners until a court order in divorce proceedings addresses it specifically.

When to Use Each Deed in Texas

Your choice of property transfer mechanism should match your situation and goals. Let's get into which tool works best in different scenarios.

Best use cases for a Lady Bird Deed

Lady Bird Deeds work great if you have concerns about potential incapacity. An agent can execute them under a properly drafted power of attorney. Elderly property owners find them particularly useful. These deeds are excellent tools for Medicaid planning protection and shield assets from estate recovery programs. Lady Bird Deeds also give you warranty provisions and more flexibility with beneficiaries.

When a TODD is the better option

Transfer on Death Deeds excel in straightforward situations where beneficiary choices are clear. Property owners below federal estate tax exemption thresholds and those with minimal debt concerns benefit most from TODDs. The cost to prepare TODDs runs lower than Lady Bird Deeds. New estate planners appreciate TODDs' standardized approach with its statutory guidance.

Naming a trust as beneficiary

Both deed types allow you to name a trust as beneficiary, which brings several advantages. This setup works well when you need property sold and proceeds split among multiple heirs. Trusts help prevent disputes about selling, leasing, or mortgaging property after death. They protect minor or disabled beneficiaries and can guard assets against creditors' claims.

Common mistakes to avoid

Recording your deed stands crucial. TODDs must be on record before death to stay valid. Legal descriptions from prior deeds matter more than imprecise property details. Powers of attorney cannot create or revoke TODDs. Remember that beneficiaries inherit both property and its debt.

Why Choose Texas Estate & Probate Lawyers

Experiences guidance and practical advice are essential to pick the right estate planning strategy. Texas Estate & Probate Lawyers make complex legal decisions simply without cutting corners.

Our Experience with Estate Planning in Texas

You need specialized knowledge to navigate Texas property transfer options. Our estate planning attorneys know the ins and outs of state law and customize every package. We bring real-world legal experience to help you understand how your decisions protect your assets and honor your wishes. With attorney-drafted documents designed for Texas requirements, you can trust that your estate plan meets all state standards.

How We Help You Choose the Right Deed

You can decide between a TODD vs Lady Bird deed at your own pace without extra appointments. Our intuitive online platform guides you step-by-step through document creation, making the legal process as simple as filling out a form. Once submitted, our attorneys review and prepare your documents, ensuring everything meets state requirements. You retain control of the process and make important legal decisions from the comfort of home, on your schedule.

Personalized Legal Guidance from an Estate Lawyer

We're redefining how Texans handle estate matters with transparent flat-fee pricing and easy-to-digest digital solutions. Our platform creates attorney-backed documents for your situation. Whether you're single, married, or managing a blended family, our packages adapt to real-life needs. Help is available if you want it, but you're never required to speak with someone unless you choose to.

Making the Right Choice for Your Estate Plan

Your choice between a TODD and a Lady Bird Deed depends on your circumstances and estate planning goals. Both options allow property to transfer outside of probate, helping family avoid delays and added expense. Lady Bird Deeds offer greater flexibility with power of attorney and warranty language, making them a stronger option when incapacity or Medicaid planning is a concern. TODDs are often a good fit for simpler transfers with clear beneficiaries and lower upfront costs.

Before deciding, it is important to consider your health, potential long term care needs, creditor exposure, and whether your plans may change in the future. Proper drafting and recording are critical to making either deed work as intended.

Texas Estate & Probate Lawyers can help you evaluate options and prepare the right documents under Texas law. Schedule a consultation today.

Frequently Asked Questions

What are the main differences between a Lady Bird Deed and a Transfer on Death Deed (TODD)?

Lady Bird Deeds offer more flexibility and can be executed through a power of attorney, while TODDs are statutorily authorized and simpler to create. Lady Bird Deeds allow for more control over the property during the owner's lifetime, including the ability to sell or mortgage without beneficiary consent.

How do Lady Bird Deeds and TODDs affect probate?

Both Lady Bird Deeds and TODDs allow property to transfer to beneficiaries without going through probate. This can save time, money, and stress for your heirs by avoiding court involvement in the property transfer process.

Can a Transfer on Death Deed (TODD) be created using a power of attorney?

No, a TODD can only be executed by the property owner themselves. In contrast, a Lady Bird Deed can be created by an authorized agent under a properly drafted power of attorney, making it a better option for those concerned about potential incapacity.

How do Lady Bird Deeds and TODDs impact Medicaid estate recovery?

Both types of deeds can protect your home from Medicaid estate recovery. Since the property transfers outside of probate, it's generally not subject to the state's attempts to recover long-term care costs after the Medicaid recipient's death.

What’s better for estate planning, Lady Bird Deed or TODD?

The choice depends on your specific circumstances. Lady Bird Deeds are often better for those seeking Medicaid planning protection or needing more flexibility. TODDs are typically simpler and less expensive, making them suitable for straightforward property transfers with clear beneficiary choices. Consulting with an estate planning attorney can help determine the best option for your situation.