What is a Lady Bird Deed?
It is a deed that transfers the real estate property to your beneficiaries after you die without going through probate. It is also known as an Enhanced Life Estate Deed.
The reason behind this is that it allows you to retain a life estate in the deed. The home or the real estate property is yours until you die.
They also allow you to revoke or change the terms of the deed anytime during your lifetime.
Benefits of a lady Bird Deed:
- Avoids probate
- Medicaid Benefit
- May avoid a gift subject to federal gift tax
What is Medicaid Benefit?
There are people who cannot otherwise pay for their medical care. Medicaid protection is designed for such people. A person applying for Medicaid benefits must have a low income and few assets.
While applying for Medicaid benefits, a person is required to disclose any assets they have given away in recent years (usually 5 years), known as the look-back period. If a person has given any valuable assets in recent years, it may disqualify them from the Medicaid benefit otherwise people would pass on their valuable assets among their families and friends to claim poverty and receive the Medicaid benefits.
How Lady Bird deeds might protect your real estate from Medicaid recovery
Lady bird deeds are not required to be disclosed while applying for Medicaid benefits. The reason behind this is that you still have control over your property transferred by way of Lady bird deeds.
For example, if you transfer your house to your son during the look-back period, you may be disqualified from Medicaid benefits but if you have done the transfer through Lady Bird Deeds, it is not required to be disclosed and you will be eligible for the Medicaid benefits.
States That Use Lady Bird Deeds
Lady Bird Deeds are used in a few states only. Medicaid recovery rules vary from state to state.
Lady Bird Deeds are more common in Florida and Texas than in any other state.
The following states use a Lady Bird Deed Florida:
- West Virginia
What are Transfer-On-Death (TOD) assets?
You can use a transfer-on-death form to name beneficiaries for vehicles, securities, and real estate to bypass probate. Cars, small boats, stocks, bonds, brokerage accounts, land, and houses all qualify as TOD assets.
A TOD designation helps in a direct transfer of your assets and property to your named beneficiaries.
How a Lady Bird Deed Works
Like regular life estate deeds, Lady Bird deeds work by giving ownership of the estate into different time periods.
A person who creates a Lady Bird Deed enjoys the right to use the property and revoke or change the deed during his lifetime. He/she is known as the Life tenant.
The people, trust, or organization who will inherit the property upon the death of the life tenant are known as remaindermen or remainder beneficiaries.
The original owner (life tenant) can sell, mortgage, or gift the property to any other person without the consent or involvement of the remaindermen or the remainder beneficiaries.
If the original owner dies, the property is transferred to the remainder beneficiaries automatically without going through probate.