A lady bird deed is a type of deed that resembles a quitclaim deed or a life estate deed. In essence, the lady bird deed allows the original owner to sign off the property to a future owner, but retain the right to live there for life as well as the right to sell it should they want to.
There is no capital gains tax on this type of deed, and it is commonly used within families to pass property between the generations and allow the property owner to have the right to live at the property while at the same time not having the property ownership, which prohibits Medicaid insurance. Many older people will choose this option to avail of Medicaid as well as to allow their beneficiaries the ability to avoid capital gains tax.
The lady bird deed is named after Lady Bird Johnson, former President Johnson's wife. It is said that he left a piece of property in this way to his wife Lady Bird.
This type of deed is not available for use in every state, but examples of states allowing these deeds are Florida and Michigan.