Using Real Estate Deeds in Estate Planning

“Pocket Deeds” vs “Lady Bird Deeds” in planning for the future.

A Pocket Deed is an executed deed that is not recorded until the occurrence of an event. Usually, in planning an estate, that event is the death of the grantor, the person conveying the real property. For a deed to effectively convey real property, there must be:

1. delivery of the deed,

2. intent of the grantor to convey the real property, and

3. acceptance by the grantee.

If a grantor signs and executes a deed with the intent of passing the real property to an heir upon their death, but maintains possession of the deed, then there has been no delivery and the deed fails. This is what happened in Boulder v. Coe, 63 So2d 275 (1953), and the court said, despite the clear intent of the grantor for the grantee to take possession of the deed after the grantor’s death, there was no voluntary delivery of the deed and it is therefore invalid. All three requirements must be met to properly pass the real property to another.

Usually the grantor does not want the grantee to have the pocket deed until the grantor has passed away. This can make the delivery requirement difficult. But delivery can be achieved by giving the executed deed to a third party because the grantor is relinquishing all control by doing so and relying on the third party to complete delivery to the grantee upon the grantor’s death, or other event. In Videon v. Coward, 241 So.2d 434 (Fla. 1st DCA 1970), Videon gave an executed deed to his wife to hold onto until his passing. The deed conveyed real property to Videon’s daughter, and upon Videon’s passing and other contingencies, the wife gave the deed to the daughter, who then recorded it. The court upheld the validity of the deed because the grantor had given relinquished control of the deed upon delivery to a custodian.

Pocket deeds have many intricacies and their effective use must be carefully planned. Thankfully, Florida recognizes Lady Bird Deeds, also known as Enhanced Life Estate Deeds, which are a preferred alternative to pocket deeds.

An Enhanced Life Estate Deed allows a grantor to convey real property to a remainderman, while maintaining possession and control of the real property so long as the grantor is living. The remainderman does not have any rights to the real property or any obligation to the real property until the grantor passes away. The grantor has the right to sell, improve, mortgage or otherwise dispose of the property at any time during their life. Essentially, the grantor continues to own the property in fee simple until the pass away. This arrangement is similar to adding a beneficiary to a bank account. Once the grantor passes away, the remainderman, or beneficiary, immediately takes ownership of the real property.

There are circumstance when a Lady Bird Deed is not the best avenue, such as if the owner has a spouse or minor child(ren). If that is the case, homestead devise restrictions may come nullify the use of an Enhanced Life Estate. Additionally, Enhanced Life Estates may not take into account any unexpected changes, such as the passing of a remainderman. Although there are many benefits to a Lady Bird Deed, it is important to discuss your circumstances and desired outcome with an attorney, because there may be better options to suit your particular needs.

Another useful tool in estate planning that is an alternative to pocket deeds is a trust. A grantor can create a revocable trust and transfer their real property, and other assets, into the trust. The trust allows the grantor to direct how the real property shall be devised after his or her passing. Then, upon the grantor’s death, the successor trustee nominated takes possession of the trust assets and will be able to distribute the property according to the grantor’s stipulations in the trust agreement. An added benefit to a trust is privacy. A trust agreement is not required to be filed with the court, whereas a deed must be recorded to validly convey real property. A revocable trust can also be amended or revoked at any time, if the grantor changes their mind about a transfer.

A pocket deed, if done correctly, can accomplish the passing of real property to an heir upon the grantor’s death, as can an Enhanced Life Estate Deed and a Revocable Trust. These are many strategies that can avoid the time and expense of probate, but it is important to speak with an estate planning attorney to learn which option is best for your particular situation. Everyone’s situation is unique and their estate plan should be tailored accordingly. Call Bedy Law for a free consultation, 727.308.0529

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