Avoiding probate may be one of your primary concerns when estate planning. Your family and loved ones are already going through a difficult and emotional time, so why put them through the added stress of time-consuming and expensive probate proceedings?
If you have real estate that you want to transfer at your death without going through probate, a Lady Bird Deed – or an enhanced life estate deed – may be for you.
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’d like
- Not having to make a gift that may be subjected to the federal gift tax
- Not risking your Medicaid eligibility
- 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 don’t 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 doesn’t count your primary residence, or it is counted up to a certain value.
You will also have to disclose if you’ve given away any assets in the past few years, called a “look-back” period. If you’ve 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?
Well, if you transferred your house to one of your children during the look-back period, you might be ineligible for Medicaid. But, if you executed a Lady Bird deed during that time, it wouldn’t be considered a transfer because you maintain control over the property and you wouldn’t have to tell Medicaid.
Also, upon your death, Florida will make a claim for Medicaid repayment from any assets you leave behind. The judge will determine which of your assets will be exempt from repayment, but if you are transferring your primary residence, then the judge will most likely say your property is homestead protected.
Lady Bird deeds aren’t legal in many states, but they are sometimes used in Texas, Michigan, and here in Florida. Other states might use a transfer-on-death deed, which transfers assets to someone else upon your death, but Florida doesn’t allow these types of deeds for real estate.
And if you’re 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 who created the deed used the Johnson family names in an example to show how the deed worked, and the name has stuck ever since.
About the Author:
Christopher Q. Wintter is the founder of Wintter & Associates, P.A. and a board-certified expert in Trust and Estate matters by the Florida Bar. With more than 24 years’ experience as a practicing attorney, he also serves as an instructor and faculty member for the National Institute of Trial Advocacy (NITA)—the nation’s leading provider of legal advocacy skills training to practicing attorneys—and has earned the AV® Preeminent™ rating with LexisNexis Martindale Hubbell. He was also selected for inclusion in Florida Super Lawyers for 2011 and 2012 in Estate and Trust Litigation.