Lady Bird Deed in Texas

What Is a Lady Bird Deed? 

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: 

• Live on, use, possess, and even collect income from the property 
• Mortgage or sell the property and keep the proceeds 
• Revoke or amend the lady bird deed 

The Differences Between Lady Bird Deeds and Transfer on Death Deeds 

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. 

• Lady bird deeds can be signed by an agent who has been given power of attorney to act on the property owner’s (grantor’s) behalf. However, transfer on death deeds cannot be signed by an agent with power of attorney. 
• For a transfer on death deed to activate, the beneficiary must survive the grantor by 120 hours. Lady bird deeds do not have this requirement. 
• Properties transferred through a transfer on death deed are not exempt from claims against the estate. Creditors can use the property to satisfy outstanding debts. The only exception is if the property is to be transferred for the purpose of the Medicaid Estate Recovery Program. 

As you can see, transfer on death and lady bird deeds are similar, but they differ in a few important ways. 

Advantages and Disadvantages of Lady Bird Deeds 

Lady bird deeds have many advantages, but there are also some drawbacks that must be considered. 

Advantages 

• Avoid Probate: Lady bird deeds streamline the property transfer process. Upon your death, the property will be transferred to your beneficiary automatically, avoiding the probate process. 
• Avoid Medicaid Estate Recovery: If the property doesn’t have to go through probate, your beneficiary may be able to avoid a claim from the state for Medicaid payments. Under Texas Medicaid rules, properties that transfer outside of probate are generally exempt from Medicaid Estate Recovery claims. 
• Maintain Control: With a lady bird deed, you maintain the right to sell or mortgage the property without having to get the beneficiary’s consent.  

Disadvantages 

• Not Ideal for Multiple Beneficiaries: A lady bird deed is not ideal if you want to leave the property to multiple beneficiaries. They would all need to agree on what to do with the property. 
• Title Insurance Can Be Tricky: Title insurance companies may not want to insure a property subject to a lady bird deed, especially if there are multiple beneficiaries. 
• Only Applies to Real Property: Lady bird deeds can only be used to transfer ownership of real property. All other assets will need to be passed down via a will, a trust, or another vehicle. 

How a Lady Bird Deed Can Help Qualify for Medicaid 

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. 

Who Should Consider a Lady Bird Deed? 

Texans may consider a lady bird deed if: 

• They want a streamlined means to transfer property ownership upon their death 
• They want their home to avoid probate after death 
• They are engaging in Medicaid planning 

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.  

A Houston Estate Planning Lawyer for Your Unique Circumstances

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.