Texas is one of only five states that offer ladybird deeds, a powerful estate planning tool.
Included in this blog:
- Understanding Ladybird Deeds
- What is a Life Estate Deed
- What is a Ladybird Deed
- How to use a Ladybird Deed
- Benefits of a Ladybird Deed
- How to Protect Assets from Medicaid Using a Ladybird Deed
- Assets, Income, and Medicaid Long-Term Care Coverage
- The Medicaid Estate Recovery Program (MERP)
- The Role of the Ladybird Deed
- The Role of Robbins Estate Law in Your Estate Planning
So what is a ladybird deed, and why is it so special?
A ladybird deed allows property owners to transfer ownership of their property to someone they select as a beneficiary upon their death. The deed bypasses the probate process while retaining flexibility not offered by equivalent “life estate” deeds in other states. Ladybird deeds also play a crucial role in asset protection by helping protect property from Medicaid recovery.
Led by a team of professionals with varied backgrounds, Robbins Estate Law works closely with our clients to create carefully tailored estate plans. Contact us to discuss whether and how a ladybird deed could fit into your estate plan.
Understanding Ladybird Deeds
A ladybird deed is a life estate deed allowing a property owner to control and live on their property during their life but automatically transfer to someone else upon death. Ladybird deeds enable you to transfer property without relying on the probate process—the often time-consuming and sometimes expensive legal process of distributing someone’s property using a will or state law after death.
What Is a Life Estate Deed?
A life estate deed is a property ownership document declaring that ownership automatically transfers to someone else when the owner dies. In this context, the property owner is the “life tenant,” and the person who receives the property is the “remainderman” or, more simply, the beneficiary. When the life tenant dies, the property transfers to the beneficiary.
While living, the life tenant retains the right to live on the property. They also have certain obligations toward the beneficiary, including:
- Maintaining the property and its value;
- Paying taxes and other fees related to upkeep; and
- Requiring consent before selling, transferring, or mortgaging the property.
Notably, you cannot change the beneficiary or beneficiaries of a life estate deed after you create it.
What Is a Ladybird Deed?
A ladybird deed, also known as a ladybird trust or an enhanced life estate deed, is a special deed. Like a typical life estate deed, the life tenant retains the right to live in and control the property during their lifetime. Upon their death, the property automatically passes without probate.
Unlike a traditional life estate, you retain more control over the property. You can typically change the beneficiary or beneficiaries at any time and may be able to transfer or sell the property without first altering the deed.
How to Use a Ladybird Deed
To create and use a ladybird deed, seek legal advice from an estate planning lawyer, who will help you to:
- Prepare the deed and name beneficiaries,
- Sign and notarize the deed,
- Record the deed, and
- Periodically review the deed.
Your lawyer will work with you at each step to ensure the deed is legally effective and reflects your wishes. Working with a lawyer can also help you update the deed whenever you experience changes in your family dynamics, health, or financial situation.
Benefits of a Ladybird Deed
A ladybird deed offers many benefits, such as:
- Avoiding probate,
- Protecting assets from Medicaid recovery,
- Allowing the life tenant to retain complete control of the property,
- Simplifying the transfer process, and
- Providing estate planning flexibility.
These benefits make the ladybird deed a valuable tool for many.
How to Protect Assets from Medicaid Using a Ladybird Deed
Medicaid planning is one of the most effective ways to use ladybird deeds. Medicaid is a government program that helps pay for long-term medical care but has strict asset and income-based eligibility limits. In Texas, a ladybird deed is often a crucial part of how to protect assets from Medicaid asset recovery.
Assets, Income, and Medicaid Long-Term Care Coverage
Medicaid has asset and income limits for long-term care coverage, like home-based health aides or nursing home services. To qualify for long-term care, you cannot have more “countable” assets or a higher monthly income than the following:
- For single applicants—assets up to $2,000 and income per month up to $2,901;
- For married couples where only one spouse is applying—the applicant spouse may have assets up to $2,000 while the non-applicant spouse may have assets up to $157,920, and the applicant may have income up to $2,901 per month; and
- For married couples where both spouses apply—assets up to $3,000 and income per month up to $5,802.
Not all assets count toward the limit. Non-countable assets include:
- Your primary residence, as long as you intend to return to the home or have a spouse or dependent living there;
- One car;
- Personal items (clothing, household goods, and furniture); and
- Life insurance policies (below specific limits).
Countable assets include most other property, like:
- Real estate (other than your primary residence);
- Cash, savings accounts, and checking accounts;
- Stocks, bonds, and other investments; and
- Vehicles beyond a primary car.
Even if Medicaid does not count your primary residence for eligibility purposes during your life, the Medicaid Estate Recovery Program (MERP) may come into play after you die.
The Medicaid Estate Recovery Program (MERP)
In Texas, the MERP enables the state government to recover certain expenses for providing Medicaid long-term care services. Specifically, the government can generally recover the cost of those services from the recipient’s estate after they die. MERP applies to the individual’s probate property, which typically includes real estate, bank accounts, and other personal property.
The Role of the Ladybird Deed
A ladybird deed allows an individual to transfer the title of their home upon their death without probate, meaning the dead is not part of the probate estate. Since the house is not part of the estate, the government will not use MERP to recover its value.
The Role of Robbins Estate Law in Your Estate Planning
At Robbins Estate Law, we understand that every client has their own concerns and goals when it comes to estate planning. We have extensive experience working with individuals and families to create plans that meet their needs. If you are considering a ladybird deed or want to learn more about protecting your property from Medicaid recovery, contact Robbins Estate Law today.
Kyle Robbins
Kyle Robbins is the founder and sole owner of The Law
Offices of Kyle Robbins. He received his J.D. with honors from the University of Texas School of Law and his B.S. in Food Chemistry and Microbiology from Oklahoma State University.
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