15 Jun
Lady Bird deeds are among the many powerful estate planning tools available to Texas residents. Whether you wish to streamline your life estate, protect your home, or bypass the probate process, a lady bird deed in Texas could be the legal solution you seek.
Keep reading to learn when you should use one, its benefits, and the risks to be aware of. This information can help you make an informed legal decision.
What Is a Lady Bird Deed in Texas?
A ladybird deed, also commonly called an enhanced life estate deed, is an estate planning tool that lets you transfer real estate to a beneficiary when you die, while keeping control of it while you’re still alive. It’s a common legal strategy to avoid the long and sometimes stressful probate process. Sometimes, people also establish lady bird deeds in Texas to protect their home from Medicaid estate recovery.
Your local trusted Medicaid planning and elder law attorney in Texas will be able to answer any other questions you have about lady bird deeds and see whether they’re the right fit for your unique situation.
The Key Benefits of Lady Bird Deeds
Many people consult legal professionals about lady bird deeds when they have a specific problem they want to resolve or a potential future issue they want to address before it happens. This estate planning tool can be of great benefit to individuals and families, as it can prove useful in a variety of circumstances:
Avoid Probate
Lady bird deeds are commonly used to help families avoid the often time-consuming probate process. Probate involves proving that a deceased person’s will is valid. During this multi-step process, the executor has the legal authority to gather assets, pay outstanding debts and taxes, and distribute property to beneficiaries. Most probate processes take at least six months to over a year, during which there are court filings, hearings, and plenty of legal costs.
However, the entire stressful process can be avoided by establishing a lady bird deed. Upon death, property immediately transfers to the beneficiary without any court involvement. This can save a great deal of stress, time, and money.
Maintain Control and Ownership Rights
When you worry about not having full control over your own property, a lady bird deed can alleviate those worries. Establishing a lady bird deed means that you maintain ownership rights of your assets during your lifetime. You can sell, refinance, or lease your home without anyone else’s permission. You can also choose to revoke your lady bird deed at any time.
Potential Protection from Medicaid
It’s easy to assume that the state will take care of you when you require help as you age, and that your home will pass to your beneficiaries when you die. However, that’s not always the case.
Many people don’t realize that even though Medicaid will pay for care services if you meet their criteria, they will attempt to recoup their costs from your estate through their estate recovery program upon your death. This means that if you own a home, some or all of the proceeds will be given to the state.
However, you may be able to stop that from happening by establishing a lady bird deed with a trusted estate planning attorney. As a lady bird deed essentially bypasses the probate process, it places your home out of the reach of the Medicaid Estate Recovery Program (MERP). It’s important to note that Medicaid rules are complex, so always seek legal advice.
Avoid Gift Tax
The property transfers from your name to that of your beneficiary upon your death, which means it can’t be taxed as a gift during your lifetime.
Risks of Lady Bird Deeds
Despite their many advantages, there are still some risks to be aware of when you approach a Medicaid and estate planning lawyer to help create a lady bird deed.
Mortgage Complications
If there’s potential for your property to still have a mortgage upon your passing, a lady bird deed may not be the most suitable option. Some mortgages have ‘due on sale’ provisions, which may create challenges when the property transfers upon death. However, your lawyer may recommend a transfer-on-death deed to address this problem.
Additionally, some title insurance companies can require beneficiary approval before a home is sold shortly after your death.
No Incapacity Protection
A lady bird deed doesn’t provide incapacity protection. This means that if you suffer a stroke or develop dementia, your family doesn’t have the authority to sell or manage your home on your behalf. You must have a financial power of attorney to address this issue.
Only Applies to Real Estate
A lady bird deed doesn’t apply to your personal property, vehicles, or bank accounts. You must have an alternative plan, such as a will or trust.
Reversion Risks
If your primary beneficiary passes away before you do, and there is no alternate named, the property will revert to your probate estate.
When to Use a Lady Bird Deed
With so many estate planning tools available, it’s not always easy to know which one is right for you. Speaking with a trusted estate planning lawyer is one of the best ways to learn about your options and their suitability for your needs.
However, a lady bird deed is typically ideal if:
- You want a simple, cost-effective way to pass your home to your loved ones without the expense of a revocable living trust.
- You want to safeguard assets from long-term care Medicaid programs.
- You own a single, straightforward property.
- You want to prevent the stress of probate for your family.
- You want complete control of your property during your lifetime.
Learn More About Lady Bird Deeds in Texas from Medicaid and Estate Planning Attorneys at Livens & Reed, PLLC
Lady bird deeds are an excellent option for a more streamlined, straightforward, and protected way to transfer property to your preferred loved ones. For more information about lady bird deeds and other estate planning tools, contact the knowledgeable Medicaid and estate planning attorneys at Livens & Reed Attorneys At Law.
Our Bedford, Fort Worth, and Addison, Dallas-based attorneys are here to help you choose the right legal tools at the right time. Contact us to start your legal service today.