With a regular life estate deed, you—the owner of the property—have the right to live on your property until your death. Upon your death, the property immediately transfers to the beneficiary designated in the deed. It’s a streamlined way to pass down a home, but there is a catch: you can’t sell or mortgage the property without the beneficiary’s consent.
A lady bird deed is considered an enhanced life estate deed. It provides all of the same benefits of a traditional life estate deed, but you keep the right to:
Lady bird deeds are only approved in a few states: Texas, Florida, Michigan, Vermont, and West Virginia. Many other states use what is called a transfer on death deed, which is similar to a lady bird deed (Texas allows for the use of both lady bird deeds and transfer on death deeds). However, these two types of deeds differ in a few ways.
As you can see, transfer on death and lady bird deeds are similar, but they differ in a few important ways.
Lady bird deeds have many advantages, but there are also some drawbacks that must be considered.
Many property owners consider using a lady bird deed as part of their long-term care planning.
In order to qualify for Medicaid in Texas, the value of your assets must be less than $2,000 if you are single and $3,000 if you are married. Your primary residence will be exempt, so you can keep your home and still qualify for Medicaid as long as your other assets do not exceed the limit.
However, there is a five-year look-back period. For example, let’s say that you use a traditional life estate deed to help your estate avoid probate. If you need to apply for Medicaid to cover long-term care costs within the next five years, the transfer of your home will be considered a gift, and you will likely be subject to a penalty period during which you will not qualify for financial assistance.
This scenario would not happen with a lady bird deed. A lady bird deed is not considered a transfer, so your home would still be exempt.
Further, because a lady bird deed helps estates avoid probate, your beneficiary does not have to worry about Medicaid making a claim against the property to recover care costs.
Texans may consider a lady bird deed if:
If you are planning for long-term care costs and Medicaid is part of that plan, a lady bird deed may help you qualify for Medicaid. It may also protect your estate from the Medicaid Estate Recovery Program.
An estate planning attorney can help you understand whether a lady bird deed is the right choice for your estate.
Whenever you find yourself needing to reach out to our office, you can be sure you won’t need to wait for days or weeks in order to get a response. Here at Stafford Law Firm, we pride ourselves on being easily accessible and on responding to all client inquiries as soon as possible.
The fact of the matter is, one day you will need to decide who inherits your home and what avenue is best for passing down your property. Whether it will simply be to pass on your assets through a will, or diving deeper and establishing a trust, long-term care plan, and lady bird deed, having a thorough and customized estate plan in place will help make sure your family and your future are well taken care of. You can rest easy knowing that an experienced Houston Estate Planning Attorney has your best interests at heart.
Schedule your free consultation right away to discuss your estate planning and long-term care goals.
Only five states allow lady bird deeds:
Lady bird deeds aren’t the right choice for everyone. A Texas estate planning attorney can help you determine whether a lady bird deed is appropriate for your situation. If it’s not, your attorney can help you find the best way to achieve your estate planning and long-term care goals.