Lady Bird Deed vs Transfer on Death Deed: Key Differences

When it comes to passing real estate to your heirs, avoiding probate is usually the top priority. Two popular tools that accomplish this are the Lady Bird Deed (also called an enhanced life estate deed) and the Transfer-on-Death Deed (TODD). At first glance, they may seem similar — both allow property to transfer automatically upon death, without the need for court involvement. However, there are critical differences in how they work, their availability by state, and the level of control they give you during your lifetime.

If you are searching for the best way to keep your home out of probate, understanding the difference between a Lady Bird Deed and a TODD can save your heirs time, money, and legal headaches. Choosing the wrong option for your situation can lead to delays, recording errors, or even challenges that put your family through a court process you were trying to avoid.

Why This Comparison Matters

Lady Bird Deeds are only available in a handful of states — Florida, Texas, Michigan, Vermont, and West Virginia — but TODDs are authorized in over 30 states. This means that for many property owners, a TODD might be the only available solution. Yet even in states where both options exist (like Texas), the choice is not always obvious.

The main distinction lies in how much control you keep while alive. With a Lady Bird Deed, you retain an enhanced life estate, which lets you sell, refinance, or revoke the deed at any time without asking your beneficiaries for permission. A TODD, on the other hand, does not create a split interest; you retain full ownership until death but must ensure the deed is properly recorded before you pass away — otherwise, it has no effect.

Common Questions People Ask

Homeowners often wonder:

• Is a Lady Bird Deed better than a TODD?

• Which one offers more protection from creditors or Medicaid estate recovery?

• Can I change beneficiaries easily if I sign either document?

• Are there differences in cost or tax treatment between the two?

This guide answers all of these questions and more, giving you a clear, side-by-side look at each option so you can make an informed decision.

Who This Article Is For

This comparison is ideal for:

• Homeowners in states like Texas who can legally choose either option

• Families looking to simplify estate planning and avoid probate

• Seniors planning for Medicaid eligibility who want to protect their home

• Anyone who wants to understand the legal and tax implications before signing a document that impacts their most valuable asset

By the end of this article, you will know exactly how each deed works, their pros and cons, and when one might be a better fit for your estate plan. In the next section, we’ll break down how each option works step by step so you can see the differences clearly.

How Each Works

While both a Lady Bird Deed and a Transfer-on-Death Deed (TODD) allow property to transfer outside of probate, the way they function is very different. Understanding these mechanics is essential before choosing one over the other.

How a Lady Bird Deed Works

A Lady Bird Deed creates what is called an enhanced life estate. This means the property owner (grantor) keeps full rights to the home while alive — including the right to sell, refinance, or revoke the deed entirely. The beneficiaries only receive an interest in the property after the owner’s death, and they have no say or control while the owner is alive.

Key steps:

• The deed is drafted with specific enhanced life estate language.

• It is signed, notarized, and recorded with the county clerk.

• Upon death, the property transfers automatically to the named beneficiaries.

Because the transfer is automatic, no court action is required, and the home avoids probate. This also keeps the transfer private and allows heirs to take possession quickly.

How a Transfer-on-Death Deed Works

A TODD, also called a Beneficiary Deed in some states, is a separate legal document that designates who will inherit the property upon death. Unlike a Lady Bird Deed, it does not create a split interest or life estate. The property owner retains full ownership and control until death.

Key steps:

• The TODD is prepared and signed following state-specific formalities.

• It must be recorded in the county where the property is located before the owner’s death to be valid.

• When the owner dies, the title transfers to the named beneficiaries without probate.

If the TODD is never recorded or is recorded incorrectly, it has no effect — the property will pass through probate as if no deed was ever created.

Side-by-Side Comparison

This table highlights a major practical difference: Lady Bird Deeds are less likely to “fail” since they can be recorded at any point before death and still work, whereas a TODD must be recorded before death to have any effect. For homeowners worried about paperwork slipping through the cracks, this distinction can be decisive.

Pros and Cons of Each

Both Lady Bird Deeds and Transfer-on-Death Deeds (TODDs) offer a way to bypass probate, but each has unique strengths and weaknesses. Knowing these can help you avoid surprises and pick the option that best fits your needs.

Pros of a Lady Bird Deed

• Maximum Control During Life: You can sell, mortgage, lease, or revoke the deed at any time without beneficiary consent.

• Less Risk of Failure: As long as it’s properly executed and recorded at any time before death, it remains valid.

• Medicaid Protection: In most states where it’s recognized, the home does not become part of the probate estate, which helps shield it from Medicaid estate recovery.

• Privacy and Speed: The transfer is automatic and not part of the public probate record.

• Low Cost: Typically less expensive than setting up a trust, and attorney fees are relatively modest.

Cons of a Lady Bird Deed

• Limited State Availability: Only allowed in Florida, Texas, Michigan, Vermont, and West Virginia. If you move to another state, the deed may not be recognized.

• Applies Only to Real Property: You still need a will or trust to handle other assets.

• Complex Drafting Language: Must contain very specific legal wording to be valid; DIY forms can be risky.

• Potential Family Conflicts: If you name just one beneficiary and have multiple heirs, disputes could arise.

Pros of a Transfer-on-Death Deed

• Available in More States: Authorized in over 30 states, making it accessible to more homeowners.

• Simple to Prepare: Forms are often standardized and available from county offices or online.

• Revocable: You can change or cancel it by recording a new TODD or a revocation form.

• Avoids Probate: Like a Lady Bird Deed, it keeps the property out of probate court if recorded properly.

• Low Cost Option: Often cheaper than preparing a Lady Bird Deed because of standardized forms.

Cons of a Transfer-on-Death Deed

• Strict Recording Requirements: If it isn’t recorded before death, it is legally void — meaning your property goes through probate anyway.

• Less Protection from Challenges: TODDs can be more vulnerable to claims of undue influence or fraud, especially if done without witnesses.

• No Enhanced Life Estate: Unlike a Lady Bird Deed, it does not split ownership; some owners prefer the added legal clarity of a life estate arrangement.

• Potential Medicaid Recovery Issues: In some states, TODD property may still be subject to Medicaid estate recovery, which can force a sale.

Key Takeaway

A Lady Bird Deed tends to be more robust and harder to invalidate, but is limited by geography. A TODD is easier to access in most states, but requires strict compliance with recording rules and may offer less protection against disputes. Your choice may depend on whether you live in a state that allows Lady Bird Deeds and how confident you are about getting the paperwork filed correctly.

Legal and Tax Implications

Beyond avoiding probate, it’s essential to understand how Lady Bird Deeds and Transfer-on-Death Deeds (TODDs) affect taxes, Medicaid planning, and the possibility of legal challenges. These factors can have major consequences for your heirs.

Tax Treatment of Both Deeds

One of the biggest advantages of both tools is the step-up in basis at death. This means that the cost basis of the property resets to its fair market value when the owner dies. If the beneficiary sells the home shortly after inheriting it, they typically pay little or no capital gains tax.

• Lady Bird Deed: The property remains part of the grantor’s estate for tax purposes, but this is a benefit — it’s what allows the step-up in basis. There is no gift tax triggered at the time of signing because the transfer is not considered complete until death.

• TODD: Offers the same step-up in basis benefit. Like a Lady Bird Deed, no gift tax is triggered when it is recorded because you retain full ownership until death.

Estate Tax Considerations

For most homeowners, federal estate tax is not an issue because the exemption is $13.61 million per person in 2025. However, if your estate is very large, the value of the property transferred by either deed will still be included in the taxable estate. For high-net-worth families, additional estate planning strategies may be required.

Medicaid and Asset Protection

A critical difference lies in how each option interacts with Medicaid estate recovery (MERP):

• Lady Bird Deed: In states that allow them, Lady Bird Deeds generally keep the property out of the probate estate, meaning Medicaid cannot place a claim after the owner’s death. This makes them a powerful tool for seniors planning for long-term care costs.

• TODD: Some states treat TODD property as part of the estate for Medicaid recovery purposes, even if it bypasses probate. This can result in the state placing a lien or forcing the sale of the property to recover costs.

Risk of Legal Challenges

Both tools can be challenged, but the process differs.

• Lady Bird Deed: Harder to contest because it is executed and recorded during the grantor’s lifetime. A challenger must prove fraud, undue influence, or lack of mental capacity at the time of signing — which is difficult if the deed was notarized and properly witnessed.

• TODD: Easier to challenge because it may not require witnesses (depending on state law), and it often uses standardized forms that are more susceptible to mistakes. Additionally, if the TODD is not recorded correctly, it becomes invalid automatically.

Recording Deadlines

One of the most significant legal risks with a TODD is the requirement to record it before death. If the owner dies before the document is recorded, the property will not transfer outside probate. A Lady Bird Deed is also recorded with the county, but it can be filed at any time before death and still take effect.

Practical Example

Imagine a Texas homeowner who signs a TODD but forgets to record it. When they pass away, the property is treated as though no TODD existed — forcing the family through probate. If the same homeowner had signed a Lady Bird Deed and simply held it until death, recording it at any time before passing would have been sufficient.

When to Use Each Option

Choosing between a Lady Bird Deed and a Transfer-on-Death Deed (TODD) comes down to availability, your goals, and how much legal certainty you want. Here’s how to decide which is best for your situation.

When a Lady Bird Deed Is the Better Choice

A Lady Bird Deed is ideal if you live in one of the five states where it’s available and want maximum control and legal security. It’s particularly recommended when:

• Your home is your primary or only major asset and you want to avoid probate completely.

• You want the ability to revoke or change beneficiaries without recording a brand-new document each time.

• You are planning for Medicaid eligibility and want to protect your home from estate recovery.

• You prefer a stronger legal tool that is less likely to fail due to recording mistakes.

Example: A Florida retiree names her two children as beneficiaries using a Lady Bird Deed. She later decides to refinance the home — something she can do without their consent. After her passing, the home transfers automatically to her children, avoiding probate entirely.

When a TODD Is the Better Choice

A Transfer-on-Death Deed is often the right choice when a Lady Bird Deed isn’t an option. It’s a practical tool when:

• You live in a state where TODDs are authorized and Lady Bird Deeds are not.

• You want a simple, inexpensive way to transfer property without hiring an attorney.

• You are comfortable ensuring the document is recorded correctly before death.

• Your estate is straightforward and does not require complex planning.

Example: A Kansas homeowner uses a TODD from the county clerk’s office to name her son as the beneficiary. She records it right away, guaranteeing that the property will bypass probate when she passes.

When to Consider Other Tools

Neither a Lady Bird Deed nor a TODD is always the perfect solution. If you have multiple properties, business assets, or complex family dynamics, you may want to consider a revocable living trust. A trust can consolidate your entire estate plan, manage distributions over time, and handle assets that deeds alone cannot cover.

Bottom Line

If you live in a state that allows Lady Bird Deeds, they generally offer stronger legal protection, easier revocability, and better Medicaid planning benefits. If you live in a state where only TODDs are available, they can still be an excellent solution as long as they are recorded promptly and correctly. For many homeowners, the right choice is whichever tool is legally valid in their state and easiest to execute without error.