Estate Planning Basics - Who is Lady Bird Johnson, and why she is part of an Estate Planning blog?

Estate Planning Basics:  Who is Lady Bird Johnson, and why is she part of an Estate Planning blog?

   Lady Bird Johnson was the wife of former President Lyndon B. Johnson, and was therefore first lady of the United States during President Johnson's time in office.  Vice-President Johnson became President, and therefore Lady Bird Johnson became first lady, on November 22, 1963 after the assassination of President John F. Kennedy.  

   Lady Bird Johnson, who was born Claudia Taylor, received her nickname, a name she never preferred, as a baby when her family's nanny remarked that she was "purty as a lady bird."  The future first lady was born and raised in Texas, and she received two degrees from the University of Texas, along with her teaching certificate.  As such, she was one of the most highly, if not the most highly, educated first ladies.  

   Before her husband became President, he was a United States Representative from 1937 to 1949, a United States Senator from 1949 to 1961, and Vice President to President John F. Kennedy from 1961 to 1963.  Without his wife's support, President Johnson's political career may have never even started, as Mr. Johnson's first Congressional campaign, in 1936, was funded by Lady Bird, who had received a large inheritance from her mother.  

   Mrs. Johnson, Lady Bird, played an active role in her husband's political career.  During World War II, while Congressman Johnson was stationed with the Navy in the Pacific, Lady Bird ran his Congressional office in Washington, D.C.  During her husband's presidency, Lady Bird was instrumental in passage of the Highway Beautification Act of 1965, which was one of our country's first environmental protection laws.  

   After President Johnson decided not to run for reelection in 1968, and at the end of his term in January 1969, he and Lady Bird retired to Texas.  President Johnson died in 1973 of a massive heart attack; Lady Bird remained in Texas until her death in 2007 at the age of 94.

   So, what does Lady Bird Johnson have to do with Estate Planning?  The Lady Bird Deed, an estate planning tool that is quickly becoming increasingly popular, was purportedly named after the former first lady after President Johnson used this type of deed to convey property to his wife at his death.

   Although a deed is a legal instrument that transfers ownership of property from one person to another, a Lady Bird Deed does not actually transfer ownership.  A Lady Bird Deed does two things instead: 

1) A Lady Bird Deed creates a power of appointment in the grantee.  With a power of appointment, the owner of property, the grantor, gives the recipient of the power, the grantee, the authority to dispose of the grantor's property. 

2) A Lady Bird Deed allows the owner of property to name a default beneficiary who will inherit the property if the owner still owns the property at his or her death.  

   To demonstrate how the Lady Bird Deed works, we'll use President and Mrs. Johnson as our example. President Johnson owned several pieces of real estate in Texas, including a ranch.  In this example, President Johnson executed a Lady Bird Deed on his ranch, in which he gave himself a power of appointment.  He also named his wife as the beneficiary of the deed, which meant that Mrs. Johnson would inherit the ranch if Mr. Johnson still owned it at the time of his death.  The end result in this example is that Mr. Johnson remained the owner of the land, retained the right to sell the land, and Mrs. Johnson inherited the land at his death.

There are several benefits to a Lady Bird Deed:

1) Property subject to a Lady Bird Deed avoids probate.  Probate is the process of administering a decedent's will through the court system.  Probate can be expensive and time consuming, which is why the Lady Bird Deed is becoming more prevalent.  

2) Property subject to a Lady Bird Deed is not subject to the gift tax.  As mentioned above, when the Lady Bird Deed is executed, there is no transfer of ownership, so there is no gift subject to federal taxes.

3) A Lady Bird Deed is not considered a divestment for Medicaid purposes.  Although Medicaid is beyond the scope of this post, it should be noted that a Lady Bird Deed can be used to avoid Medicaid divestment penalties.

   In conclusion, a Lady Bird Deed is an estate planning tool that is becoming increasingly popular because of the many benefits it provides.  To learn more, please visit my website at www.toburenlaw.com to schedule an appointment.