Serving Clients Throughout Fort Worth and Tarrant County
Through the years, clients have come to us with questions about how to plan for their golden years. How will I cover the cost of long-term care in a nursing home? Am I eligible for Medicaid? Will I be able to keep my property? Depending on the circumstances, we may recommend creating a Texas “Lady Bird” deed.
Located in Fort Worth, the Law Office of Carey Thompson, PC is one of the premier elder law and estate planning firms serving clients throughout the state of Texas. We are dedicated to protecting the rights of elders, helping them find solutions to the challenges of aging, and putting their minds at ease.
What is a Lady Bird Deed?
Texas is one of the few states that recognizes Lady Bird deeds, also known as an “enhanced life estate deeds.” It basically allows your estate to avoid probate; however, you can continue controlling your property during your lifetime. A Lady Bird deed can also help preserve your eligibility for Medicaid. At the same time, your beneficiaries can retain property that the state might otherwise take to repay the cost of benefits you receive during your life.
In a standard life estate deed, a beneficiary is named to inherit your property. While you retain ownership of it during your lifetime, there are significant restrictions. In particular, you don’t have the right to sell or mortgage the property. A Texas Lady Bird deed combines the features of a traditional life estate deed with the retained power to sell, convey, or mortgage the property without the remainder beneficiary’s consent.
One common misconception about the origin of Lady Bird deeds is that the late President Lyndon Johnson used one to transfer property to his wife, Lady Bird. Actually, Lady Bird deeds got their name after the Florida attorney who created the deed back in the 1980s used the names of the Johnson family as an example in explaining how the deed works, and the name stuck.
How does a Lady Bird Deed Work?
A Texas Lady Bird deed basically divides fee simple ownership into a life estate, lasting the lifetime of the current property owner, and a remainder interest, that does not allow possession until the current owner dies. In short, the property is transferred from the current owner, as a fee simple owner to him/herself as a life tenant. The person creating the enhanced life estate deed retains ownership of the property as a life tenant and can continue using it as he or she sees fit. Additionally, one or more remainder beneficiaries are named who inherit the property when the current owner dies. The transfer occurs automatically, however, without the need for probate.
What are the benefits?
Texas Lady Bird deeds provide a number of benefits, including:
- Avoiding Probate — A Lady Bird deed avoids probate by automatically transferring property at the time of an owner’s death, which avoids the delay, cost, and privacy concerns associated with probate.
- Medicaid Asset Protection — An enhanced life estate deed can help preserve Medicaid eligibility during the owner’s life and prevent the property from being taken by the government under the Texas Medicaid Estate Recovery Program.
- Retaining Homestead Exemption — Because the owner retains control of the property during his or her lifetime, the property retains its homestead status, allowing the owner to take advantage of the favorable property tax and asset protection exemptions.
- Avoiding Capital Gains — Since the owner retains the property until his or her death, the remainder beneficiary will receive the property on a “stepped-up basis” for income tax purposes, which can result in significant income tax savings if/when the remainder beneficiary sells the property.
- Retaining Control — Unlike a traditional life estate deed, a Lady Bird deed allows the owner to retain control over the property, giving him or her the flexibility to change the transfer without the remainder beneficiary’s permission.
- Cost Savings — Preparing a Lady Bird deed is less expensive than preparing a will or living trust, and also saves probate costs at the owner’s death.
How do I create a Lady Bird deed in Texas?
Although Lady Bird deeds are recognized in Texas, there is no explicit law on how the deed should be prepared. However, forms have been developed by attorneys in conjunction with title insurers that are customarily used under Texas law. It is worth noting that specific language must be included stating that the deed qualifies as a Lady Bird deed in order to transfer the property to the remainder beneficiaries, avoid probate and maintain the Texas homestead exemption.
Texas Lady Bird Deed Attorney
The Law Office of Carey Thompson, PC provides comprehensive estate planning services to clients in Texas, including the preparation of wills, living trusts and Lady Bird deeds. We believe that estate planning is about more than just drafting documents, however. By taking the time to understand each client’s unique concerns and objectives, we customize estate plans to suit their individual needs. If you are looking to retain ownership and control of your property, maintain eligibility for Medicaid, and avoid probate, we can help. Call our office today or complete the contact form on our website to set up a consultation.