What is a Lady Bird Deed?

What is a ladybird deed?

Lady Bird deeds, available in select U.S. states, give owners control as an “enhanced life estate deed.”

Unlike traditional life estate deeds, owners can sell or lease the property during their lifetime.

In a life estate, the holder can live on the property until death, after which it transfers to someone else on the deed, but they lack control over the property.

An Image of a Lady Bird Deed
What is a Lady Bird Deed? Photo Source (Freepik)

What is a Lady Bird Deed (Enhanced Life Estate Deed)

A Lady Bird deed names a beneficiary for your home while letting you keep a life estate, allowing lifetime use.

Unlike basic life estate deeds, it can be changed or revoked during your lifetime, earning it the term “enhanced life estate” deed.

People use Lady Bird deeds to maintain Medicaid eligibility and protect family assets from state claims.

However, this strategy is effective in only some states.

States That Use Lady Bird Deeds

Lady Bird deeds are used in a few states.

These states include:

  • Florida
  • Texas
  • Michigan
  • Vermont
  • West Virginia

Their effectiveness in shielding homes from Medicaid recovery varies, and local customs may impact acceptance, with some places posing challenges.

Even in listed states, the prevalence of Lady Bird deeds differs; they are common in Florida and Texas but less so elsewhere.

If your state isn’t mentioned, consult a local estate planning attorney to assess its applicability.

How Does It Work

A standard life estate deed lets you name a beneficiary but imposes restrictions on property control.

An enhanced life estate deed, like the Lady Bird deed, provides the following advantages:

  1. Avoiding probate
  2. Maintaining property use and sale rights
  3. Modifying or revoking the deed
  4. Preventing gift tax
  5. Safeguarding Medicaid eligibility
  6. In some states, protecting the property from being sold to repay Medicaid benefits after death.

How to Create a Lady Bird Deed

Creating a Lady Bird deed varies by state.

Consult with a knowledgeable attorney familiar with your state’s laws for guidance.

In some states, property owners can change the deed to a transfer on death deed (TODD), naming a default beneficiary.

The beneficiary claims the property after the owner’s death by recording the death certificate and filing a Property Transfer Affidavit.

Typically, homeowners list themselves as life tenants and name a remainderman beneficiary in the Lady Bird deed.

Multiple beneficiaries, like three children, can be named.

A Lady Bird deed can be executed using a power of attorney if it meets statutory requirements.

Lady Bird Deed and Long-Term Care

Long-term care is costly, and if Medicaid covers nursing home expenses, it may seek reimbursement from the person’s estate after death.

This could use assets, including a home. (Note: Estate recovery is a state-level Medicaid program; Medicare doesn’t have it, and rules can vary.)

In Michigan, a Lady Bird deed safeguards the home as an exempt asset for Medicaid and prevents estate recovery liens post-owner’s death.

Keep in mind that these regulations may change.

For Medicaid planning, especially in Michigan, consult an elder law attorney for advice on asset protection strategies.

Ensure your loved one complies with eligibility rules and look-back periods.

Alternatives to Lady Bird Deeds

As mentioned earlier, only a few states utilize Lady Bird deeds. Are there other options?

A notable alternative is the transfer-on-death deed. This deed is often a simpler and more widely accepted method to bypass probate compared to a Lady Bird deed.

Moreover, the transfer-on-death (TOD) deed is applicable in around 30 states.

However, if you seek the Medicaid-related advantages of a Lady Bird deed, consult a local attorney to determine if a transfer-on-death deed in your state can fulfill your Medicaid objectives.

Conclusion

Lady Bird deeds let you have control over your property in certain states, allowing flexibility while you’re alive.

They’re good for planning for Medicaid, but they only work in some places.

If you’re not in those states, you can consider a transfer-on-death deed, which is a simpler way to avoid legal complications in about 30 states.

It’s important to talk to a lawyer to understand these options and make sure you’re following the rules.

Knowing the details of each choice is crucial to fit the plan to your own situation and goals.

Further Reading!

What Does a Probate Attorney Do: Key Insights

Can a Guardianship Override a Power of Attorney?

Can I Amend My Living Trust Without an Attorney?