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Vermont Estate Planning Blog

Monday, July 27, 2020

Lady Bird Deed Has Soared into Vermont Statutes

An Enhanced Life Estate Deed (ELED), sometimes referred to as a “Life Estate Deed with Reserved Powers,” “Lady Bird Deed,” “Medicaid Deed,” or “Italian Deed,” graduated from Vermont’s common law into Title 27 of the Vermont Statutes when Governor Phil Scott signed the Vermont Enhanced Life Estate Deed Act into law on July 13, 2020.  Although there are variations of life estate deeds in other states, Vermont has been just one of six states that recognize an ELED.  (The 5 other states include Texas, Florida, Michigan, North Carolina, and West Virginia.)

With the common law life estate remaining intact, the main purpose of the ELED Act was to clarify some of the rights and reservations of the property owner (Grantor), settling title questions raised by Courts, lenders, and title insurance  companies.

The following outline recaps the highlights of previously-existing ELED:

¨ Grantor conveys a property interest to a Grantee that takes effect upon the death of the Grantor

¨ Grantee acquires immediate title to property upon death of Grantor, without probate

¨ There is no Gift Tax return requirement, as there is no present gift

¨ The property receives a step-up in tax basis (for capital gains)upon the death of the Grantor

¨ If used as a primary residence, the property is an exempt asset for Medicaid purposes (with an equity limit of $595,000 if no spouse resides there) AND there is no transfer penalty

As an improvement upon existing common law, the ELED Act adds the following clarifications:

¨ Grantor may revoke or revise the deed without consent of Grantee

¨ Granting of mortgage does not revoke the ELED

¨ If a sole Grantee, or a “tenant-in-common” Grantee predeceases the Grantor, that interest will pass to that Grantee’s heirs or beneficiaries in Probate

 



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