Lady Bird Deeds

Where did it get its name?

Despite popular belief, the Lady Bird Deed is not named after Lady Bird Johnson. According to Professor Gerry Beyer of Texas Tech University, this type of deed was so named because the Florida attorney who drafted the first Lady Bird Deed around 1982, Jerome Ira Solkoff, used a fictitious group of characters named Linton, Lady Bird, Lucie, and Lynda in his elder law book and lecture materials explaining how to use the deed.

How does it work?

A Lady Bird Deed is also known as enhanced life estate deed or revocable life estate deed. A Lady Bird Deed transfers the Grantor’s interest to the Grantee upon Grantor’s death. However, the Grantor, during his life, retains a life estate with the ability to exclusively occupy and use the property and the ability to sell, convey, lease, mortgage, or refinance the property without the consent of the Grantee(s). The Grantor may also take back the property by revoking the deed without the consent of the Grantee. (Grantees are also referred to as beneficiaries in some Lady Bird Deeds.)

Avoids Probate

A Lady Bird Deed avoids probate because the property passes to the Grantee immediately upon the death of the Grantor, without the need for probate. After executing a Lady Bird Deed, the Grantor retains his or her homestead rights and ad valorem tax breaks on the property. Upon the death of the Grantor, the Grantee receives a stepped-up basis for capital gains purposes. The Grantee also takes the property subject to any mortgage on the property.

No Effect on Medicaid Eligibility

Executing a Lady Bird Deed does not affect Medicaid eligibility (i.e., five year look back period) and, in fact, avoids collection by the Medicaid Estate Recovery Program. In other words, when the Grantor dies and has been on Medicaid, the State of Texas cannot come after the property for reimbursement of Grantor’s Medicaid expenses. You can even execute a Lady Bird Deed while on Medicaid in a nursing home.

In conclusion, Lady Bird Deeds are an effective tool in estate planning to avoid
probate and allow one to pass their real property to their heirs, without
impacting Medicaid eligibility.