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Legality of the Ladybird Deed

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I get the question all the time: is the Ladybird Deed legal in NC? The answer is yes. But, I don’t want you to simply take my word without any further information. So, in an effort to settle the question once and for all, let me give you the legal basis for the Ladybird Deed. But first, why question it at all?

Maybe you did a Google search for Ladybird deeds in NC. Maybe you were talking to your neighbor. But someone somewhere said that Ladybird Deeds aren’t legal in NC. But here we are saving homes every day with this wonderful tool. Why the discrepancy? Well, the problem is that the people posting these articles on the internet aren’t doing their homework. Likely, they scanned the statutes in NC to see if it mentions “Ladybird Deed” and didn’t find it. Thus, they declare that NC doesn’t allow the Ladybird Deed.

The problem is: we don’t have a statute for the Ladybird Deed. In fact, most of our property law in NC is not codified in statute. Our property law is predominantly derived from common law or judge made law (also known as “legal precedent”). See Statute of Wills, 32, Hen. 8, c. 1 (enacted in 1540).

With that out of the way, what precedent allows for the Ladybird Deed.  To recap, a Ladybird deed allows you to put a beneficiary on property (who you can change any time) without giving away any property interest). 

We can trace the roots all the way back to jolly old England. English common law allows for something called a “power of appointment.” When you think of power of appointment, the best example is something like designating a beneficiary on a life insurance policy (note: this is not exactly a power of appointment but is good enough for this analogy). On a life insurance policy, you can pick a beneficiary to get the death benefit. However, that’s not set in stone. You can change that beneficiary any time. This is  because you have the power to appoint whoever you want. A power of appointment is similar.

Per N.C.G.S. Section 4‑1, adopted in 1778, English common law is the law of the land in NC unless something says otherwise. There are no laws in NC preventing a power of appointment. Thus, the next question is: what precedent allows for a power of appointment on a deed?

This is a legitimate question because deeds convey interest. Usually, when a deed is executed, something (some right or interest in real property) is given. If the property is given to your beneficiary, then how do you retain a power of appointment. It’s like giving away your life insurance policy, yet retaining the power to pick the beneficiary. Luckily, both issues were solved in a super old case: Troy v. Troy, 60 N.C. 624 (1864).

Troy basically said that you can: 1. assign a beneficiary to property without giving them any interest; and 2. maintain a power to appoint any other beneficiary at any time without another person’s consent.

This gives us the legal basis for the Ladybird Deed that we now know and love.


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