What is a Lady Bird Deed?

In the complicated world of estate planning, including what happens to your real property after you pass away, the Lady Bird deed is an essential tool for many. Attorneys and clients turn to the Lady Bird deed because of its beneficial and versatile application. 

But what is a Lady Bird Deed? Before using this deed, it’s important to understand what the Lady Bird deed is, where it comes from, how it fits into a plan, and why you should talk to a lawyer who understands how to use it.

How Does a Lady Bird Deed Work?

A Lady Bird deed, also known as an enhanced life estate deed, is a legal instrument used to transfer real estate property to designated beneficiaries upon the owner’s death. Unlike a quitclaim deed, property subject to a Lady Bird deed allows the owner to retain full control and possession of the property during their lifetime.

This unique type of deed provides the grantor, or property owner, with the flexibility to change or revoke the conveyance without the need for the beneficiaries’ consent during the grantor’s lifetime.  Additionally, a Lady Bird deed avoids probate by facilitating a transfer of the property upon your death without further action needed. The name “Lady Bird” may evoke a sense of elegance and sophistication, which is fitting for a legal tool that offers such intricate design and versatile functionality.

History of the Lady Bird Deed

The Lady Bird deed, sometimes called a transfer on death deed, originates from the broader framework of life estate deeds. It’s a traditional method of transferring property rights that allows the grantor the right to use and control the property until their death, at which point the property transfers to the designated remainderman.

However, the Lady Bird deed differs from the conventional life estate deed in its unique feature that allows the grantor to retain absolute control over the property during their lifetime, including the ability to sell the property, mortgage the property, or lease it without the beneficiaries’ approval.

The use of the deed itself is often quoted as tracing back to the mid-twentieth century, inspired by former President Lyndon B. Johnson. The enhanced life estate deed gained notoriety after the former president executed a conveyance to his wife, Lady Bird Johnson, from which the name “Lady Bird deed” is taken. There is much speculation about the truth of this story. Still, regardless of whether it is true or not, since then, attorneys have embraced and refined this type of deed as a core estate tool for many clients.

Benefits of a Lady Bird Deed

One of the primary advantages of a Lady Bird deed lies in its potential to streamline property transfer without undergoing the probate process. Lady Bird deeds are typically used to avoid probate.

The deed may be used to transfer property to either an individual or even to a trust.  By doing so, the property can swiftly pass to the designated beneficiaries, saving time and minimizing the associated costs and complexities. This characteristic is particularly beneficial for individuals seeking to ensure a seamless and efficient transfer of real estate assets to their intended beneficiaries.

Moreover, the Lady Bird deed holds significance in the context of Medicaid planning, as it enables property owners to retain eligibility for Medicaid benefits while simultaneously transferring property to their beneficiaries upon their death.

By retaining the ability to modify or revoke the conveyance during their lifetime, individuals can strategically navigate Medicaid eligibility requirements and safeguard their assets from potential Medicaid estate recovery programs.

Using a Lady Bird Deed for Medicaid Planning

Utilizing a Lady Bird deed, also called an enhanced life estate deed in the context of Medicaid planning, involves strategic navigation of strict legal policy to ensure the preservation of assets while simultaneously maintaining eligibility for Medicaid benefits.

The primary objective of incorporating a Lady Bird deed into the Medicaid planning process is to safeguard real estate assets from potential Medicaid estate recovery efforts, thereby enabling individuals to transfer property to their beneficiaries while retaining Medicaid eligibility during their lifetime. Remember that this option is not available in every state; an experienced estate planning attorney can guide you.

Steps to Using a Lady Bird deed for Medicaid planning

  1. Consultation with a Knowledgeable Legal Professional: Initiate the process by seeking guidance from an experienced estate planning or elder law lawyer.  An in-depth consultation with legal counsel can provide a comprehensive understanding of the legal implications and potential strategies for utilizing a Lady Bird deed.
  2. Assessment of Medicaid Eligibility Requirements: Conduct a thorough assessment of the individual’s Medicaid eligibility status, considering the specific Medicaid rules and regulations applicable in the relevant jurisdiction.
  3. Identification of Assets and Property Evaluation: Identify the real estate assets subject to Medicaid and evaluate their current market value. Assess the implications of transferring these assets through a Lady Bird deed, considering the potential impact on Medicaid eligibility and the long-term preservation of assets for the designated beneficiaries.
  4. Crafting a Comprehensive Plan: Work with an attorney to develop a comprehensive long-term care plan that integrates the Lady Bird deed as a strategic component. The plan should encompass a detailed analysis of the individual’s financial circumstances, healthcare requirements, and long-term objectives, aiming to balance asset protection, Medicaid eligibility, and the seamless property transfer to the intended beneficiaries.
  5. Execution and Implementation of the Lady Bird Deed: Execute the Lady Bird deed in compliance with the specific legal formalities and requirements mandated by the jurisdiction. Ensure the deed accurately reflects the individual’s intentions and aligns with the predetermined Medicaid planning objectives. 
  6. Periodic Review and Adjustment: Regularly review your estate plan and the Lady Bird deed to accommodate changes in the individual’s financial circumstances, healthcare needs, or Medicaid regulations. Periodic reassessment and adjustment can help ensure its continued efficacy and alignment with the individual’s evolving priorities and goals.

What Happens Upon the Death of the Property Owner? 

The property passes directly to the remainder of the beneficiaries specified in the Lady Bird deed, bypassing the need for court involvement or the oversight typically associated with the probate process. This streamlined transfer mechanism enables the beneficiaries to assume immediate ownership and control of the property without encountering delays or impediments often encountered in traditional probate proceedings.

Furthermore, the property passes according to the terms and conditions outlined in the Lady Bird deed, which may include specific provisions regarding the distribution of the property among multiple individuals or the imposition of certain restrictions or conditions on the property’s use or disposition.

Moreover, the property’s transfer through the Lady Bird deed does not typically trigger the imposition of Medicaid estate recovery, as the property does not form part of the probate estate. This feature is particularly advantageous for individuals engaged in Medicaid planning, as it enables the preservation of the property for the designated beneficiaries while concurrently safeguarding the grantor’s eligibility for Medicaid benefits during their lifetime.

Unlike conventional life estate deeds, where the property automatically transfers to the designated remainderman, the Lady Bird deed allows the grantor to retain absolute control and ownership of the property during their lifetime, including the right to sell or mortgage the property. 

Should You Use a Lady Bird Deed with Your Estate Plan? 

When considering the use of a Lady Bird deed, individuals facing concerns related to long-term healthcare costs, Medicaid eligibility, or the preservation of generational wealth may find this instrument particularly valuable.

Additionally, including a Lady Bird deed within an overall estate plan can complement other tools, such as wills, trusts, and powers of attorney, fostering a cohesive and comprehensive strategy for the efficient management and transfer of assets.

Given the legal nuances and potential implications of using a Lady Bird deed, individuals must seek guidance from a knowledgeable legal professional. Consulting with an experienced lawyer like the team at McIntyre Elder Law can provide valuable insights into the specific implications of the Lady Bird deed, including its impact on Medicaid planning, property tax considerations, and the rights and interests of the remainder beneficiaries.

We can offer personalized advice tailored to the individual’s unique circumstances, ensuring informed decision-making and the development of a robust estate that aligns with their long-term objectives.

Contact McIntyre Elder Law at (888) 999-6600 or click here to get started with a complimentary no-obligation consultation today.

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Greg McIntyre, JD, MBA

Meet Greg McIntyre

Greg McIntyre, founder of McIntyre Elder Law, is more than just an attorney. As a Navy Veteran, father to six kids, and a loving husband, he values family deeply. This drives his commitment to helping clients safeguard their futures and pass down legacies.

Greg has a passion to help people. Beyond just legal advice, he loves having conversations and strives to build a long-term relationship with every clients that comes through his door.

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