Lady Bird Deed for Medicaid Planning: Enhanced Life Estate Guide
How Lady Bird deeds (enhanced life estate deeds) work for Medicaid planning, which states allow them, and why they're often better than traditional life estates.
Key Takeaways
- 1Lady Bird deeds let you keep full control while transferring property at death
- 2You can sell, mortgage, or revoke without remainderman consent
- 3Only available in about 5 states: Florida, Texas, Michigan, Vermont, West Virginia
- 4Avoids probate and may avoid Medicaid estate recovery
- 5No gift tax implications since transfer is incomplete during life
- 6Better than traditional life estates for most Medicaid planning
What Is a Lady Bird Deed?
A Lady Bird deed (also called an enhanced life estate deed) is a special type of deed that gives you more control than a traditional life estate.
- **Named after**: Lady Bird Johnson, though she didn't actually use one
- **Full control retained**: You can sell, mortgage, lease, or revoke at any time
- **No remainderman consent needed**: Unlike traditional life estates
- **Transfer at death**: Property passes automatically to named beneficiaries
- **Revocable during life**: You can change your mind and cancel or modify it
The Key Difference
With a Lady Bird deed, you retain the power to do anything with the property during your lifetime—including selling it and keeping all the proceeds. Traditional life estates don't allow this.
Lady Bird vs Traditional Life Estate
Understanding the differences helps you choose the right option.
| Feature | Lady Bird Deed | Traditional Life Estate |
|---|---|---|
| Sell property alone | Yes—keep all proceeds | No—need remainderman consent |
| Mortgage property | Yes—full control | No—limited to life estate value |
| Revoke or change | Yes—anytime | No—irrevocable without consent |
| Gift tax on creation | No—incomplete gift | Possibly—completed gift |
| Stepped-up basis | Yes—full | Yes—full |
| Probate avoidance | Yes | Yes |
Lady Bird deeds offer significant advantages over traditional life estates
States That Allow Lady Bird Deeds
Lady Bird deeds are only recognized in a handful of states.
- **Florida**: Most commonly used state for Lady Bird deeds
- **Texas**: Enhanced life estate deeds recognized
- **Michigan**: Strong Lady Bird deed tradition
- **Vermont**: Allows enhanced life estate deeds
- **West Virginia**: Recognizes Lady Bird deeds
- **Other states**: May need to use trusts or other strategies instead
State-Specific Rules
If your state doesn't recognize Lady Bird deeds, you'll need alternative strategies like a revocable trust or Medicaid Asset Protection Trust. Consult a local elder law attorney.
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Medicaid Planning Benefits
Lady Bird deeds offer several advantages for Medicaid planning.
- **No transfer penalty**: Since you retain full control, it's not a completed gift
- **No 5-year lookback issue**: Can be created even close to Medicaid application
- **Avoids estate recovery**: Property passes outside probate, limiting recovery options
- **Keep Medicaid homestead exemption**: Your home remains exempt while you live
- **Flexibility**: If you need to sell for care costs, you can
- **Peace of mind**: Know your home will pass to heirs without probate
Best of Both Worlds
Lady Bird deeds give you Medicaid planning benefits without the restrictions of traditional life estates or irrevocable trusts. You maintain control while planning for the future.
How to Create a Lady Bird Deed
Creating a Lady Bird deed requires proper legal drafting.
- **Hire an elder law attorney**: This is not a DIY project
- **Specific language required**: Must include the enhanced powers clause
- **Recording required**: Must be filed with county recorder of deeds
- **Title insurance**: Check with your title company about future insurability
- **Cost**: Typically $500-$1,500 depending on complexity and state
- **Timing**: Can be done at any time—no 5-year wait required
Comprehensive Asset Protection
Protecting your home is just one piece of the puzzle. Your retirement savings also deserve protection from market volatility and inflation. A Gold IRA lets you hold physical precious metals in a tax-advantaged retirement account.
Protect All Your Assets—Not Just Your Home
A Lady Bird deed protects your home. But what about your retirement savings? Consider diversifying with physical gold.
- Gold provides stability when markets are volatile
- Physical gold in an IRA offers tax-advantaged growth
- Augusta Precious Metals specializes in retirement asset protection
Frequently Asked Questions
1What is the difference between a Lady Bird deed and a regular life estate?
A Lady Bird deed (enhanced life estate) lets you retain full control to sell, mortgage, or revoke the property without consent from remaindermen. A traditional life estate is irrevocable and requires consent from all parties to sell or change.
2Does a Lady Bird deed trigger Medicaid lookback?
No. Because you retain full control over the property, a Lady Bird deed is not considered a completed gift and does not trigger the 5-year Medicaid lookback period. This is one of its main advantages.
3Which states recognize Lady Bird deeds?
Lady Bird deeds are recognized in Florida, Texas, Michigan, Vermont, and West Virginia. Other states may require different strategies like revocable trusts or Medicaid Asset Protection Trusts.
4Can I create a Lady Bird deed myself?
It's strongly recommended to work with an elder law attorney. The deed requires specific legal language to be valid and effective for Medicaid planning. Errors could cause the deed to fail or create unintended tax consequences.
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