Deeds are an estate planning tool that can be used to ensure that real property ends up in the hands of a person's desired beneficiary. Depending on the type of deed used, there can be many advantages, including the avoidance of probate and the preservation of real property in the face of long-term-care needs. The most common deeds used are:
A gift deed transfers real property outright from the owner (Grantor) to the beneficiary (Grantee).
The Grantee owns the property outright, and does not have to wait on the Grantor's death to sell the property, and no probate is required in order to pass the property. If done far enough in advance, property will not be subject to estate recovery.
Grantor loses all control over property (troublesome if property is Grantor's home); loss of step-up in tax basis.
These deeds are used when the Grantor wants to retain some control over the property while they are living. This deed gives the Grantor lifetime rights in the real property, meaning that while the Grantor is living, they have control of the property.
If done far enough in advance, property will not be subject to estate recovery. The step-up in tax basis is preserved, and the Grantor does not loose control of the property while living (important when property is Grantor's homeplace).
Grantee looses the ability to sell the property without the signature of the Grantor; which will also likely restrict the Grantee's ability to get a loan on the property. Life estate interests are also countable for Special Assistance Medicaid, which could cause qualification problems down the road.
These deeds are most often used in crisis planning situations. Lady Bird Deeds are similar to Gift Deeds Reserving Life Estate, but the difference is that the Grantor retains the right to sell the real property without the signature of the Grantee.
May help Grantor avoid estate recovery issues in a crisis Medicaid situation. Also gives Grantor the ability to sell the property without the signature of Grantee, which is appealing to some folks. Step-up in tax basis is also preserved.
Rules related to Estate Recovery could change subjecting these deeds to recovery.