Ladybird Deeds

September 8, 2011 by · Leave a Comment 

By Adil Daudi, Esq. 

house_deedAvoiding probate is (or should be) a main objective of all estate plans.  By avoiding probate (a systematic distribution of assets, which is beyond our clients’ control) our clients have the power to determine how their assets will be distributed upon their death.  There are many tools available to accomplish this aim; one such tool is the ladybird deed.  It should be noted that ladybird deeds by themselves are insufficient to avoid probate; however, if used in conjunction with other probate avoiding tools, such as trusts and pour-over wills, our clients can successfully avoid probate.

What is a ladybird deed? 

To understand what a ladybird deed is, it is essential to know what a deed is.  A deed is a legal instrument that transfers an interest in real estate.  The most common type of deed is a “fee simple” deed.  A fee simple deed conveys property from Person A to Person B.  Once signed and delivered, Person B immediately becomes the owner of the real estate.  Unlike a fee simple deed, a ladybird deed does not immediately convey the property.  A ladybird deed conveys the property to another person but reserves ownership to the grantor (the person who conveys the property) for so long as the grantor is living.  For example, if Person A executed a ladybird deed to Person B, Person A would still own the property until Person A dies; at which point, Person B becomes the owner of the property. 

In addition to remaining the owner of the property until death, the grantor of a ladybird deed reserves the right to sell, mortgage, or transfer the property during their life.  So if Person A executed a ladybird deed to Person B, Person A could still sell the property or give it to someone else.  Ladybird deeds thus avoid probate by designating the person to whom the property will be distributed upon the grantor’s death.  If a ladybird deed (or other deed) is not in place, the property would be subject to probate. 

Ladybird deeds are not always the appropriate solution to avoid probate.  Choosing the wrong deed or using it at an inappropriate time may have significant negative consequences.  Moreover, there are many tax, Medicaid, and other implications associated with deeds; as such, qualified attorneys create each estate plan on a case-by-case basis based on the specific facts and situations of each client. 

Adil Daudi is an Attorney at Joseph, Kroll & Yagalla, P.C., focusing primarily on Asset Protection for Physicians, Physician Contracts, Estate Planning, Business Litigation, Corporate Formations, and Family Law. He can be contacted for any questions related to this article or other areas of law at adil@josephlaw.net or (517) 381-2663.

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To Will or Not To Will…

July 7, 2011 by · Leave a Comment 

By Adil Daudi, Esq.

A few weeks ago I was approached by a client who stepped in to discuss his estate plan. He began the meeting by telling me he wanted to create a Shariah compliant Will that will ensure his assets are distributed pursuant to the terms given to us by Allah s.w.t. Before proceeding with his demands, I asked him if he was fully aware of the benefits of creating a Will and whether he knew he had other options.

This scenario is all-too-common. Under the right circumstances, there is nothing wrong with drafting a Will as part of your Estate Plan, however, prior to taking any steps, it is important to be informed on what you are drafting and why.

A Last Will and Testament is very commonly used, but many are not sure what it exactly entails. Although it is very easy to draft a will, be sure to consult with an Attorney on the benefits and drawbacks of actually having one.

Prior to any plan it is always important to know why you should even have one. For any Muslim, having an estate plan is not discretionary, but rather mandatory. Narrated by Ibn Umar, Prophet Muhammad (s) once said: “It is not right for any Muslim person who has something to bequeath to stay for two nights without having his last will and testament written and kept ready with him.”

The following are certain factors, or facts, that should be considered when drafting a will.

1. Every Will must go through Probate: Probate is a court system that determines the validity of your will and helps facilitate in the process of distributing your assets. Note:  assets cannot be distributed until this process has completed. On average, the entire probate process can take between four-to-six months. 

2. Costs: Here is a very common misconception concerning a Will. “I got a Will because it is cheaper than a Trust.” Do not fall into the trap of thinking a Will is the best estate planning tool just because it is the cheapest. I have heard many clients proudly claim they created their Will for free online. But what they don’t realize are the costs that are associated with the Will after they die. Probate costs are not cheap. On average the entire probate process can cost between 3-5% of your estate.

It is important to realize that when discussing your estate planning options, it should not be dependent on how much you pay today, but rather how much your estate will pay at the end.

3. Public Information: Depending on how much value you place on privacy, the administration of a Will provides you with none. Once your Will is filed with the court, it becomes accessible to the general public.

These are some of the issues that you should consider when contemplating your estate plan. Fortunately, there are other options available for you to consider that can be cheaper and more effective. That is why it is important to speak with an Attorney to discuss your options and more importantly to discuss the options on how best to effectuate the distribution requirements pursuant to Shariah law. With the proper planning, you will have set up the best method that suits your individual needs, saves you money, and satisfies the requirements of Allah (s.w.t.)

Adil Daudi is an Attorney at Joseph, Kroll & Yagalla, P.C., focusing primarily on Asset Protection for Physicians, Physician Contracts, Estate Planning, Business Litigation, Corporate Formations, and Family Law. He can be contacted for any questions related to this article or other areas of law at adil@josephlaw.net or (517) 381-2663.

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