While Lady Bird Deeds offer many benefits—like avoiding probate and keeping control of your property during your lifetime—they may not be the right choice for everyone. Depending on your goals, a will or other estate planning tools might be more suitable.
Here are some potential disadvantages and dangers of using a Lady Bird Deed:
1. Limited to Real Estate
A Lady Bird Deed only applies to real property—like your home or land. If you want to transfer other assets (bank accounts, personal belongings, vehicles, etc.), you’ll still need a will or trust. (Albeit, in some states you may be able to transfer vehicles through a Lady Bird Trust as well.)
2. May Not Work in Every State
Not all states recognize Lady Bird Deeds. If you move or own property in another state, the deed might not be valid or function the same way. A will or revocable trust is often more broadly accepted. Some states have estate planning legal instruments that function similarly, so it is important to seek out information specifically for your situation, and to consider consulting with estate lawyers.
3. Can Cause Confusion or Conflict
Because Lady Bird Deeds transfer property outside of probate, they can override your will—which may lead to disputes if your estate plan isn’t coordinated. Beneficiaries might argue over who was truly meant to inherit the property. While Lady Bird Deeds in your state may not require advance notification of beneficiaries, it can be a good idea to communicate intentions in advance in order to reduce conflict amongst inheritors. In most instances, if you have different instructions about the allocation of your property in your will and you have a Lady Bird Deed that specifies someone else will receive your property, the Lady Bird Deed will prevail.
4. No Asset Protection for the Beneficiary
After you pass away and the property transfers, your beneficiary receives full ownership—along with any responsibilities, debts, or risks tied to the property (like unpaid taxes or liens). Unlike a trust, a Lady Bird Deed doesn’t offer creditor protection or control over how the beneficiary uses the property.
5. Not Ideal for Complex Family Situations
If you have multiple heirs, blended families, or wish to control how property is used after your death (e.g., until a child reaches a certain age), a Lady Bird Deed may be too simple. A trust allows for more detailed instructions and long-term control. That is not to say that a Lady Bird Deed cannot specify multiple beneficiaries will inherit the property after your death–it could. But, there can be multiple considerations, so consult with a professional about your options.
6. Unintended Tax or Medicaid Consequences
Although Lady Bird Deeds can help avoid Medicaid estate recovery in some states, the rules vary and change frequently. Lady Bird Deeds also may have capital gains implications depending on how the deed is structured. It’s important to get legal or tax advice before using one.
Final Thoughts
Lady Bird Deeds are useful for simple, straightforward real estate transfers, especially when avoiding probate is a priority. But for more complex estates—or for people wanting greater flexibility, protection, or control—a will, trust, or other strategy may be better suited. Always talk to a qualified estate planning attorney to find the best fit for your needs.
