Lady Bird Deed vs. Texas Transfer on Death Deed: Key Differences, Benefits, and Which Is Best for You

Both Lady Bird Deeds and Texas Transfer on Death Deeds (TODDs) allow property owners to transfer real estate to heirs without the need for probate while keeping full control during their life. But they are not identical. This article will help you understand the similarities, differences, and which deed will best suit your needs.

Below I will discuss:

What is a Texas Transfer on Death Deed?

A Texas Transfer on Death Deed is authorized by statute. It lets you name one or more beneficiaries who take title to your real property when you die. You keep all rights during life, including the right to sell, refinance, or change the beneficiaries. The deed must be signed, notarized, and recorded in the county property records before death, or it is ineffective.

What is a Lady Bird Deed?

A Lady Bird Deed arises from Texas common law. It creates an enhanced life estate for you, with the power to occupy, sell, mortgage, or cancel the deed without the beneficiary’s consent. It does not have a statutory recording requirement to be valid between the parties.

How Lady Bird Deeds and Texas Transfer on Death Deeds are Alike

In everyday planning, both deeds function similarly.

• They avoid probate for the covered real estate, because title shifts at death by the terms of the deed rather than through the estate.
• They preserve the owner’s full control during life. You can live in the property, rent it, or sell it.
• They do not trigger a completed gift while you are alive.
• They protect the owner’s homestead rights and exemptions during life.
• They generally allow a step-up in income tax basis at death, which can reduce capital gains if your beneficiary later sells.
• They insulate the property from your beneficiary’s creditors while you are alive, since the beneficiary has no present ownership.

Another shared feature is their usefulness in long-term care planning. A homeowner will not be disqualified from receiving Medicaid benefits regardless of whether they sign a Lady Bird Deed or a transfer on death deed.

Currently, the Medicaid Estate Recovery Program (MERP) can only recover assets included in the deceased individual’s probate estate. A home that is part of a deceased person’s probate estate can be subject to MERP. Because both the Lady Bird Deed and Texas Transfer on Death deed pass property outside of probate, they avoid Medicaid estate recovery.

Key Differences Between Lady Bird Deeds and Transfer on Death Deeds

Despite their similarities, Lady Bird Deeds and Transfer on Death Deeds differ in several significant ways:

Two Year Clawback Period

Under the Transfer on Death Deed statute, the personal representative or a creditor may bring the property back into the estate, to the extent necessary, if the estate lacks assets to pay debts, taxes, or family allowances. This claims period typically lasts up to two years after death. Because of that, some title companies are cautious about insuring sales by a beneficiary of a Transfer on Death Deed during that window unless they see proof that debts have been resolved. There is no parallel statute for Lady Bird Deeds. Courts are still developing how these rules interact with common-law deeds, and practitioners watch this area closely.

Warranties

A Transfer on Death Deed transfers title without any covenant of warranty. Lady Bird Deeds can be drafted with or without warranties, similar to other deeds. The no-warranty rule for TODDs can raise questions about whether the decedent’s title policy will cover the beneficiary, and it is another reason title companies sometimes request extra documentation after a TODD transfer.

Who Can Sign the Deed

The Texas Transfer on Death Deed statute states that only the homeowner can sign a Transfer on Death Deed. An agent under a Durable Power of Attorney cannot create one on the owner’s behalf. By contrast, if the power of attorney expressly authorizes it, an agent may sign a Lady Bird Deed for an incapacitated owner. Therefore, if the homeowner lacks capacity, an agent under a power of attorney cannot execute a Transfer on Death Deed. However, an agent under a power of attorney will be able to execute a Lady Bird Deed if the power of attorney so authorizes.

Recording Requirements

In Texas, most deeds don’t have to be recorded to be valid. Texas law only requires the grantor to sign the deed and deliver it to the grantee. However, there are several benefits of recording the deed. Recording the deed gives the public notice of the property transfer. This can help avoid disputes and ensure that all parties recognize the transfer. 

In order for a Transfer on Death Deed to be valid, it must be signed, notarized, and recorded in the property records of the county where the property is located. A Lady Bird Deed does not require recording to be valid as between the parties. Therefore, if there is a possibility that the Grantor will not be able to record the deed before their death, the Ladybird Deed is a better option.

Note, however, a title company recently refused to accept the validity of a deed my deceased client signed transferring his interest in his home to his trust, arguing that the fact that my client did not record the deed before he died suggested that he may have intended to revoke it.

Lady Bird Deed or Texas Transfer on Death Deed: Which is Best for You?

It depends.

A Transfer on Death Deed is a great option for most homeowners who want to transfer property without probate. But, if the homeowner lacks capacity, there is a concern about future title problems, or a desire to sell the property within the two-year claims period, a Lady Bird Deed may be a better option.

Do I Need a Will if I Have a Lady Bird Deed or Transfer on Death Deed?

Yes. Lady Bird Deeds and Transfer on Death Deeds are efficient ways to pass your real estate without probate, but they don’t control all of your property. They also don’t provide a backup plan in case the deed fails for some reason, like if all the beneficiaries you named do not survive you.

A valid Texas Will acts as a safety net. It lets you appoint a trusted friend or family member to settle your estate, care for your children, and transfer your remaining property to your beneficiaries.

Legal Considerations for Lady Bird Deeds and Transfer on Death Deeds

One thing to watch is whether courts will impose rules that apply to the Transfer of Death Deeds on Lady Bird Deeds.

According to legal precedent, if a statute revises the common law, the statute controls. However, the Transfer on Death Deed statute specifically provides that “the statute does not affect any method of transferring real property otherwise permitted under the laws of the state.”

So a question remains about whether courts will interpret Lady Bird Deeds as a “method of transferring real property otherwise permitted under the laws” of Texas. If so, the Transfer on Death Deed statute would not control them. If not, then courts may impose the rules that apply to Transfer on Death Deeds on Lady Bird Deeds.

For example, the Transfer on Death Deed statute permits allows the personal representative  or creditor of the estate to claw a piece of property transferred by Deed, whereas no such rules applies to Lady Bird Deeds. However, I recently learned of a district court case in which a court ruled that a Lady Bird Deed was subject to the claw back provision of the Transfer on Death Deed Statute. There is no appellate court opinion related to this case because the case settled before the appellate court issued a decision.

Conclusion: Get Legal Advice for Your Situation

If you are considering incorporating Lady Bird Deeds or Transfer on Death Deeds into your estate plan, consulting with an experienced Texas estate planning attorney can provide valuable guidance, including assistance with Lady Bird Deeds, Transfer on Death Deeds, and other legal matters.

This article was published on July 30, 2023, and updated on January 30, 2025.