A Lady Bird Deed, also known as an enhanced life estate deed, is a type of deed used to transfer a remainder interest in real property to your beneficiaries, while retaining the right to live in the property. What makes it an “enhanced” life estate is that along with the ability to live in the property, you also retain the right to finance or sell the property.
In addition, property transferred using a Lady Bird Deed does not go through the probate process but instead passes immediately to the designated beneficiaries upon your death.
There are a number of advantages regarding your property rights and Medicaid eligibility if you decide to use a Lady Bird Deed. Some of those advantages include:
Avoiding probate for the property;
Maintaining your right to use and profit from the property during your lifetime;
Maintaining the right to sell the property whenever you would like;
Not having to make a gift that may be subjected to the federal gift tax;
Not risking your Medicaid eligibility; and
Preventing the property from being sold upon your death to repay the Medicaid benefits cost
A standard life estate deed, on the other hand, allows you to designate a beneficiary to inherit your property while you maintain ownership rights during your lifetime but with substantial limitations. You do not have the right to mortgage or sell the property under a standard deed, and you might end up liable to your beneficiary if you significantly decrease the value of the property.
Medicaid and the Lady Bird Deed
If you need Medicaid to cover the cost of your medical care, you will have to disclose your assets, including how much money and property you have. Usually, Medicaid does not count your primary residence, or it is only counted up to a certain value.
You will also have to disclose if you have given away any assets in the past few years, called a “look-back” period. If you have given away valuable assets in order to claim Medicaid benefits, you may be ineligible for Medicaid for a period of time.
How does a Lady Bird deed fit into this?
If you transferred your house to one of your children during the look-back period, you might be ineligible for Medicaid. However, if you used a Lady Bird Deed during that time, it would not be considered a transfer because you maintain control over the property.
Also, upon your death, Florida may file a claim for Medicaid repayment from any assets subject to probate. However, property transferred through a Lady Bird Deed is not subject to probate, thus, cannot be used to pay creditors.
If you are wondering about the name, it has nothing to do with President Lyndon B. Johnson transferring property to his wife Lady Bird. In the 1980s, the Florida lawyer used the Johnson family names in an example to show how the deed worked, and the name has stuck ever since.
If you have real estate that you want to transfer to a beneficiary, contact Wintter Law today to see what options are best for your particular needs and situation.