Do you want a beneficiary to inherit real estate without the hassle of the property going through probate? One of your options is a "Lady Bird" deed, also known as an "enhanced life estate" deed. This type of deed can be an efficient and affordable way to pass down real estate. Of course, there will also be some disadvantages to consider, and this type of deed is not available in every state. Read on to see if a Lady Bird deed could be right for you.
If you have a standard life estate deed, you would name a beneficiary who would inherit the real estate upon your passing, but you would retain ownership of it for as long as you live—with limitations. You would not be allowed to put your property up for sale, or to mortgage it. You might even owe the beneficiary should the property's value plummet, perhaps from letting the property become rundown, as an example.
But with a Lady Bird (enhanced life estate) deed, you would keep the real estate out of probate, and you would further retain free and unfettered ownership of the property throughout your life. That means you could use the property and profit from it as you choose, even being free to sell it. At the same time, a Lady Bird deed would still allow you to be eligible for Medicaid. Depending on the state, a this deed would also keep the real estate from being sold after you pass away in order to pay off the Medicaid benefits you collected.
In fact, it is worth looking into how a Lady Bird deed can help you stay eligible for Medicaid benefits. These benefits are meant to go to people who would not be able to meet the costs of their medical treatment otherwise. Thus reporting your income and property is part of the application for Medicaid. You do not have to report everything, however. For example, your primary residence would probably not be calculated as one of your resources. Your estate plan could figure into this process though, as any real estate you have given to others in the recent past could be included as a resource.
This is to prevent people from just gifting all their valuables so as to qualify for Medicaid benefits. Hence the "look-back" period; if you give any property away within that time, then you might not qualify for benefits. That is if you do not give the property away through a Lady Bird deed. If you transfer your home to your child with this enhanced life estate deed, for example, then you would not have to list this transfer, since you are still the owner of this real estate. If your primary residence on its own would not disqualify you from Medicaid benefits, neither will its transfer.
In some cases, your family would be helped by having the property be transferred through a Lady Bird deed instead of through probate court. After someone on Medicaid benefits passes away, the state seeks repayment from that person's assets, per federally mandated Medicaid "estate recovery". In some states, only assets that are in probate can be used to repay these benefits; in other states, any property could be used for repayment. If you live in a state where only probate estate is used for this reimbursement, then a Lady Bird deed could protect your property, enabling it to be safely handed down to your beneficiary.
Now these Lady Bird, or enhanced life estate deeds are not an option in most parts of the country, but they are available in a few states, such as Texas and Florida. In some other states, there are transfer-on-death deeds available, which would still keep the property out of probate while still providing the Medicaid advantages mentioned above.
If you want to know if this type of deed is an option for you, or if you have any other estate plan questions, contact an experienced probate attorney today. You can find the legal expert you need on our directory.
(If you have a question about the name "Lady Bird", it did not come from President Lyndon Johnson transferring real estate to his wife, Lady Bird, through this type of deed. Where did the name come from? A Texas Tech law professor says that the attorney who first established this type of deed employed the names of the Johnson family when he illustrated how the deed operated. Then their names became permanently linked to the deed itself.)