Vermont lady bird deed

What a lady bird deed does in Vermont

A lady bird deed, formally an enhanced life estate deed, reserves a life estate for you while keeping the power to sell, mortgage, lease, or take the property back without your remainder beneficiary's signature. That retained power is what makes it 'enhanced'. At your death the property passes directly to the remainder beneficiaries outside probate. Florida, Texas, Michigan, Rhode Island, Vermont, and West Virginia recognize it, and Maryland, Missouri and Virginia recognize the same idea as a life estate deed with powers.

In Vermont the governing statute is 27 V.S.A. §§ 651-660. Vermont's Enhanced Life Estate Deed Act (27 V.S.A. chapter 6, in effect since July 13, 2020) authorizes this deed and prints an optional form (27 V.S.A. § 660). You keep a life estate and the right to sell, mortgage, or revoke without the beneficiary's consent. The beneficiary holds only a contingent remainder, which the beneficiary cannot sell and the beneficiary's creditors cannot reach, and which vests at your death. Every owner who signs it must be an individual, not a trust or a company (27 V.S.A. § 653(4)).

The Vermont law behind this deed

Start with 27 V.S.A. §§ 651-660 if you want to read the statute's own language. The table below lists the main statutes behind the rules on this page.

When Vermont property owners use a lady bird deed

• Avoid probate while keeping complete control of the house
• Keep the federal step-up in basis and your Vermont homestead declaration (a life estate holder who lives in the home files Form HS-122)
• Estate planning where a traditional life estate would give away too much control
• Medicaid planning in a state that does not treat the transfer as a divestment

What Vermont requires on the deed

These are the execution and formatting rules town and city clerks enforce. Getting any of them wrong is the usual reason a deed comes back in the mail.

How to complete and record it in Vermont

1. 1Find your current deedYou need the legal description from it, word for word. If you can't find your copy, the Town or City Clerk can provide one, usually for a few dollars.
2. 2Identify everyone by full legal nameNames must match the current deed and government ID exactly, middle names included. A mismatch creates a gap in the chain of title that shows up years later at closing.
3. 3Complete the deedDeedly builds it with the wording, notary certificate, and 3-inch first-page margin used for Vermont deeds.
4. 4Sign in front of a notaryBring photo ID. Wait to sign until you are in front of the notary: you have to appear before the notary anyway, and signing there leaves no question about who signed.
5. 5Complete Form PTT-172, Vermont Property Transfer Tax Return (file it online in myVTax, or on the paper form if you file fewer than five returns a year)Vermont requires this alongside the deed, including for exempt transfers. Your filing packet explains which boxes apply to your situation.
6. 6Record it with the Town or City ClerkFile in the town where the property is located and pay the recording fee. Each town or city clerk decides whether to accept electronic recording (27 V.S.A. § 624). If you prepared the deed yourself, plan to record in person or by mail. Keep the stamped receipt. It fixes your priority date.
7. 7Tell the people you named where it isAt your death they record a certified death certificate, and in some states an affidavit, to show that your life estate has ended. Ask your insurer whether they should be added to the policy now.

What it costs in Vermont

Vermont charges a property transfer tax of 1.47% generally (1.25% plus a 0.22% clean water surcharge); on the new owner's principal residence, 0.5% of the first $200,000 (no surcharge) and 1.47% above that; on a home fit for year-round use that will not be the new owner's principal residence or a long-term rental, 3.62% (3.4% plus the surcharge). Customarily paid by the grantee. The tax is figured on the price paid, or on fair market value for a gift. A life estate or lady bird deed is valued as the interest transferred, using the grand list value and the IRS factor for the owner's age (32 V.S.A. § 9601(6)). If the deed divides a parcel, attach the Act 250 Disclosure Statement (32 V.S.A. § 9608). If the land is enrolled in Current Use, say so on the return; a land use change tax lien can follow the land, and a new owner who wants to stay enrolled must apply within 30 days after recording.

Exemptions that commonly apply to a transfer like this: transfers between spouses or civil union partners for no consideration (32 V.S.A. § 9603(5)), gifts for no consideration between parent and child or child's spouse, or grandparent and grandchild or grandchild's spouse (32 V.S.A. § 9603(5)), transfers into a trust to the extent it benefits you or those relatives, and transfers from that trust back to them for no consideration (32 V.S.A. § 9603(5)), deeds that confirm or correct an earlier recorded deed, for no added consideration (32 V.S.A. § 9603(4)), changes in the form of ownership with no change in who owns it beneficially (32 V.S.A. § 9603(6)), and transfers under a divorce decree dividing the couple's real estate (32 V.S.A. § 9603(19)). You have to claim the exemption. The recorder won't apply it for you.

Where to record it in Vermont

Vermont deeds are recorded with the Town or City Clerk in the town where the property sits, not where you live. There are 247 towns in Vermont.

Each town or city clerk decides whether to accept electronic recording (27 V.S.A. § 624). If you prepared the deed yourself, plan to record in person or by mail.

Recording offices we cover in Vermont: Burlington, Essex, South Burlington, Colchester, Rutland, Bennington, Essex Junction, Rutland Town. See all Vermont recording offices.

What a lady bird deed does NOT do

Being honest about the limits is more useful than a sales pitch. Every one of these catches somebody out.

• Florida, Texas, Michigan, Rhode Island, Vermont, and West Virginia accept it, and Maryland, Missouri and Virginia recognize the same idea as a life estate deed with powers. Some counties elsewhere will record one, but recording is not the same as validity.
• It does not defeat Medicaid estate recovery in every state, and the rules change. Confirm your state's current position before relying on it.
• It does not remove or restructure a mortgage. The loan stays in your name and on the property.
• It is a specialized instrument. If your estate is large, taxable, or contested, this is a conversation for an attorney rather than a form.

Quirks of Vermont law that catch people out

• Vermont records deeds with the town or city clerk of the municipality where the land lies, not with the county. There are 247 town and city clerks. Deeds for land in one of Vermont's few unorganized towns or gores go to the county clerk (27 V.S.A. § 403).
• Every Vermont deed needs a Property Transfer Tax Return (Form PTT-172), even when the transfer is exempt, and the town clerk cannot record the deed without it. File it online in myVTax or, if you file fewer than five returns a year, on the paper form delivered with the deed. The clerk charges $15 to receive it. Pay any tax to the Vermont Department of Taxes (online or with Form PTT-173), not to the town, within 30 days of the transfer.
• If you are married and the property is your home, your spouse must sign and acknowledge the deed too, even if your spouse is not on title (27 V.S.A. §§ 141, 349).
• Vermont eliminated the witness requirement in 2004. A notary alone is sufficient today.
• Vermont is one of the few states with a lady bird deed statute, the Enhanced Life Estate Deed Act (27 V.S.A. chapter 6). The deed is subject to property transfer tax when recorded, valued as a remainder interest, unless an exemption applies (27 V.S.A. § 654(d); 32 V.S.A. § 9601(6)).