30 Apr
As you get older, there’ll come a time when you need to make big decisions regarding your assets, health, and finances. However, there can be a great deal of fear associated with the unknown, particularly when you’re not sure whether you’ll be able to receive the care you need while simultaneously keeping your home in the family.
In this guide, you’ll learn about the legal protections in place so that you can maintain your health and well-being with Medicaid in Texas while protecting your home from the Medicaid Estate Recovery Program.
What is a Lady Bird Deed?
A Lady Bird Deed, also known as a Lady Bird Trust and a Transfer on Death Deed, is a Life Estate Deed. It enables a homeowner to transfer their real estate directly to their beneficiaries upon death, bypassing probate, avoiding gift taxes, and protecting against Medicaid Estate Recovery.
Essentially, a Lady Bird Deed in Texas is an estate planning tool that allows a Medicaid beneficiary to prevent the Medicaid Estate Recovery Program from taking their home when they die.
Rather than a property going to the state’s Medicaid agency as reimbursement for the costs associated with someone’s long-term care, it goes to a loved one as an inheritance. However, this only comes into force when you die. Before then, you retain the right to sell, mortgage, or change beneficiaries at any time.
Why Is a Lady Bird Deed Needed for Medicaid?
To understand how important a Lady Bird Deed is, especially as a Medicaid estate planning tool, you need to know how Medicaid views your assets and its intentions with them.
To be financially eligible for long-term Medicaid, you must have limited assets. Those asset limits vary by state, but in Texas in 2026, they are:
- $2,000 for an individual
- $3,000 for a married couple where both spouses are applying
- $2,000 for a married couple where one spouse is applying, and $162,660 for a non-applicant
If your assets are over the limit as a Medicaid applicant, you must ‘spend down’ the excess to meet the limit. However, the Medicaid applicant’s primary home doesn’t count toward the asset limit. It’s also automatically exempt if the spouse, a child under age 21, or any disabled or blind children live in the home.
If none of the aforementioned relatives live in the home, the equity interest in the applicant’s home must be below a specified value. In 2026, in Texas, that figure is $752,000, minus outstanding debt. Because of Medicaid’s Look Back Rule, you also can’t gift or sell the property under fair market value in the 60 months before your Medicaid application, or there will be a penalty period before you’re eligible for Medicaid.
A Lady Bird Deed May Protect Your Home
Medicaid won’t take your primary home while you’re alive, but that can change upon death. The state will typically try to recover the expenses of your long-term care through your estate via its Medicaid Estate Recovery Program. Lady Bird Deeds in Texas are designed to protect your home from this program. As homes with a Lady Bird Deed bypass probate and go directly to beneficiaries, Medicaid can’t make a claim against them.
Lady Bird Deed vs. Irrevocable Trust vs. Gifting
When you have an asset that you don’t want the state to take upon your death, it’s hard to know what to do about it. Most people consider three options: a Lady Bird Deed, an Irrevocable Trust, and gifting.
While gifting might seem like the natural first choice, it’s fraught with issues. If you gift your home, you may be ineligible for Medicaid under the 60-month Look-Back Rule. This rule enables them to review your financial records to find assets sold or gifted for less than fair market value.
When simplicity and ease are your preferences, Irrevocable Trusts don’t fulfill your requirements, either. They are complex legal structures that permanently remove assets from your estate for tax or asset protection purposes, and they can’t be changed.
In contrast, a Lady Bird Deed provides complete control and the freedom to change it. You can sell, mortgage, or lease your home without beneficiary consent during your lifetime and enjoy peace of mind knowing that ownership is transferred to your beneficiary upon your death.
Lady Bird Deed Limitations
You can protect your home with a Lady Bird Deed and still plan for Medicaid, but there are limitations. Firstly, Lady Bird Deeds are only recognized in some states:
- Texas
- Florida
- Michigan
- Vermont
- West Virginia
Pending: A bill has been introduced in South Carolina to permit Lady Bird Deeds, but it has not yet passed.
Medicaid rules also vary by state. Some states may still attempt recovery under expanded definitions. Additionally, Lady Bird Deeds don’t protect against everything. It won’t shield your home from creditors during your lifetime, and it also doesn’t replace full Medicaid planning.
Learn More About Lady Bird Deeds from Livens & Reed in Texas
We understand how important it is to protect your assets when planning for long-term care. If you’re exploring Medicaid care and want to be sure that your home will be protected, discuss Lady Bird Deeds with the knowledgeable elder law team at Livens & Reed Attorneys At Law.
Our Medicaid Planning & Elder Law attorneys can learn more about your situation and discuss the most suitable options. We’re here to help you achieve the peace of mind you deserve. Request an appointment today.
