What is the difference between a Lady Bird Deed and a Transfer on Death Deed?

Lady Bird Deeds (or more formally: Enhanced Life Estate Deeds), have been used historically to transfer real property upon death.  More recently, the statutory creation of a Transfer on Death Deed (or TODD) offers another way to transfer real property upon death.  Which is the better way to go?  It depends.  Below we offer a comparison of the similarities and differences of what can be done with the two different approaches.

This is a very brief comparison of Lady Bird Deeds and Transfer on Death Deeds.  While Transfer on Death Deeds offer simplicity for the layperson to attempt to dispose of a home, which is typically the primary or only asset, Lady Bird Deeds offer more options and flexibility but can be more complex.  If you need help with your estate planning or have questions, contact the Law Office of Roy Neal Linnartz, PLLC at 830-625-9300.

Probate is typically not difficult or expensive if you have a well-designed estate plan.  However, if you do not have a complex estate, you may desire to plan for probate avoidance.  Enhanced Life Estate Deeds (Lady Bird Deeds) or Transfer on Death Deeds (TODDs) can be used to pass real property outside of the probate process.

Bank accounts, retirement accounts, investment accounts, and other accounts with financial institutions can be set up to pass without the necessity of probate.  Accounts which are owned by more than one person can be set up to be owned by Joint Tenants with Rights of Survivorship (JTWRS).  If one of the account owners dies, the surviving account owner(s) automatically owns the balance of the account.  Depending on the type of account, the terminology may differ but the result is the same in naming a Beneficiary, Transfer on Death (TOD), or Payable on Death (POD) designee.  While the designee is not an owner of the account, when the account owner passes, the balance of the account passes to the designee.

Vehicles can passed to a beneficiary by using the Beneficiary Designation for a Motor Vehicle form (VTR-121) from the Texas Department of Motor Vehicles.  By completing this form, you can designate a beneficiary who will receive your vehicle if you die and the vehicle will not have to go through probate.

The above is a very basic description of some methods of probate avoidance.  For more complicated estates, a trust may be necessary to avoid probate.  Use of these methods without planning can lead to unintended consequences so you should discuss with your financial planner as well as an estate planning attorney.  If you would like assistance with planning for probate avoidance, call the Law Office of Roy Neal Linnartz, PLLC at 830-625-9300.

What is a Lady Bird Deed and how can I use it as part of my estate plan?

Enhanced Life Estate Deeds (aka Lady Bird Deeds) are a tool that can be used in estate planning to keep real property out of probate.  Essentially, the maker of the deed gives a remainder interest in their property to a person or persons, but the maker retains the right to use the property for their lifetime.  The maker also reserves the right to change or terminate the terms of the deed, sell the property, or mortgage the property.  Because the maker of the deed retains full rights to the property and the right to terminate the deed, it is not considered a gift to the remainder interest holder.  Use of this type of conveyance allows the maker to pass the property outside of probate and would not be subject to Medicaid reimbursement claims.  Since this type of conveyance is not considered a gift, it can be used to plan for Medicaid to preserve the primary residence as an asset and can be made by a power of attorney (unlike Transfer on Death Deeds).  If spouses are making a conveyance simultaneously, we often include a right of survivorship before the conveyance of the remainder interest so the surviving spouse retains 100% ownership.  However, this is determined on a case-by-case basis based on the outcome desired.  Assuming the property is community property, they could elect to allow their community property to convey upon the first to pass leaving an undivided interest with the surviving spouse.

If you want help with estate planning, Medicaid planning, or a Lady Bird Deed, contact the Law Office of Roy Neal Linnartz, PLLC at 830-625-9300.

In Texas, if you receive Medicaid benefits, the State is required to try to recover those costs by filing a claim against the estate and a house can be used to satisfy that claim, with some exceptions. Medicaid has a 5 year lookback period so if you give your house away or sell it for less than fair market value within 5 years of requiring Medicaid assistance, there may be a penalty imposed or a delay in getting benefits.

One of the best ways to protect a house from a Medicaid claim is through an Enhanced Life Estate Deed, sometimes called a Ladybird Deed or a Transfer on Death Deed. In the Enhanced Life Estate Deed, you keep the right to revoke the deed, to mortgage the property, to sell the property, or do anything with the property during your lifetime. Upon your passing the remainder interest in the property will vest in someone else, perhaps your child(ren). A Transfer on Death Deed allows you to put a beneficiary on your property.  Because you have retained ownership and control of the property in either instrument, there is no gift or transfer so it is not subject to the 5 year lookback. When you pass the property immediately passes to someone else so it is not subject to probate and is not subject to a Medicaid estate recovery claim.

If you are interested in protecting your house from a Medicaid estate recovery claim, you should discuss it with an experienced estate planning attorney.  Contact the Law Office of Roy Neal Linnartz, PLLC at 830-625-9300 for help protecting your home from Medicaid.

If qualifying for Medicaid and asset preservation are a concern, we can help the client prepare. Medicaid, unlike some other government programs, is not an entitlement program; if you receive benefits, the State of Texas wants to be reimbursed upon your passing. There are also income and asset requirements to qualify.

The income threshold to qualify for Medicaid is very low and, oftentimes, people make too much money to qualify but cannot afford to pay for the care they need with the income they have. A solution to this is the use of a Qualified Income Trust, or frequently called a Miller Trust. Income is directed to the Qualified Income Trust where a small allowance can be paid to the person and their spouse but the remainder goes to pay for their care and reduces their income to a threshold that qualifies for Medicaid.

The asset threshold to qualify for Medicaid is also very low. People are required to spend down their assets to qualify for benefits. One solution that helps some people is a Medicaid qualified annuity. This is a method of turning cash or other liquid assets into non-countable resource but provides an income stream.

The State of Texas has a Medicaid Estate Recovery Program (“MERP”) which attempts to get reimbursement after a person passes for Medicaid dollars spent on that person’s care during their lifetime. Medicaid will file a claim into the decedent’s estate for payment and typically the only asset remaining is the homestead. However, equity in a homestead can be protected. Sometimes people think they will just give away assets when they foresee a need for Medicaid in the future. The State of Texas anticipates people will try to do this so they have a five-year look back period. If assets are liquidated during the five years prior to the Medicaid application, there is a penalty period. The five-years look at gifts of interest in property during the look back period. A Transfer on Death Deed or an Enhanced Life Estate Deed (aka Ladybird Deed)is a conveyance that passes property outside of probate, thus protecting the homestead property and the equity in it for beneficiaries while not creating a disqualifying event for Medicaid.

If someone is concerned about Medicaid qualification or protection of assets, we include that in the planning we do with them.

For more information on Medicaid Planning In The State Of Texas, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (830) 625-9300 today.

What is a Transfer on Death Deed?

A Transfer on Death Deed is a tool that allows you own and control real property during your lifetime and then pass your real property to beneficiaries after your death without having to probate your estate. A Transfer on Death Deed needs at least one beneficiary but can have multiple beneficiaries and can have contingent beneficiaries should a primary beneficiary predecease you. The Transfer on Death Deed must be recorded in the Deed Record of the County where the real property is located prior to death. Other than passing real property outside of the probate process, a benefit of Transfer on Death Deeds is that it protects your homestead real property from a Medicaid recovery claim if you receive Medicaid benefits.

For more information on Transfer on Death Deeds and Medicaid Planning In The State Of Texas, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (830) 625-9300 today.