Texas law allows a slick trick to transfer title to real estate you own on your death without probate. For many people, their residence or other real estate comprises the biggest part of an estate that normally would require probate to pass title. Texas law has recognized an estate planning trick that is extremely effective and low cost, called a deed with an enhanced retained life estate or “Lady Bird” deed. This tool can be used for all types of real estate interests. If you have drawn up this deed to real property prior to your death, you might be able to avoid probate entirely, if the rest of your assets have been designated with beneficiary or payable on death arrangements.
With this type of deed, you can name the beneficiaries you wish to receive real estate on your death, who are called “remaindermen”, but you retain all of the benefits of ownership of the property until your death. Texas law allows you even to retain the property tax homestead exemption after the Lady Bird deed transfer. Upon your death, all that is required for title to remain in the names of these beneficiaries is the filing of an affidavit reflecting the date of your death, and that there are no outstanding debts of the estate and no estate or inheritance tax due.
Your Rights of Ownership Retained During Your Life
The enhanced life estate deed, or Lady Bird deed, if drafted properly, allows you as the owner of the “life estate” in the property to mortgage, lease, sell, or even revoke the deed without the consent of the remaindermen. This unique special feature of the Lady Bird deed or deed with enhanced life estate is not recognized in all states, however, so out-of-state property may or may not be dealt with in this same manner. Your attorney will need to research whether this deed can be used in the same way in other states.
Saves Time, Trouble, and Expense
The Lady Bird or enhanced life estate deed makes the transfer of title to your beneficiaries much quicker. It also eliminates the trouble and expense of probate or some other simpler non-probate procedure to transfer title to real estate on your death. The expense savings can amount to thousands of dollars.
If you are in a situation in which you are applying for Medicaid benefits, the Lady Bird or enhanced life estate deed also is beneficial. The value of your interest in the property, your life estate, will be much less than the full value of the property in calculating your eligibility for Medicaid. This may make the difference between qualifying and not qualifying or for how long you are disqualified from receiving benefits.
Medicaid Lien Avoidance
If you need to receive Medicaid assistance during your lifetime, the federal government can place a lien on property of your estate. Currently, another major benefit of using a Lady Bird or enhanced life estate deed is placing the property beyond the reach of a Medicaid lien if you received Medicaid benefits during your lifetime which had not been repaid. Again, Texas law may be different on this point than other states, and Texas law could change in the future.
When To Consider Using This Trick
You can use this form of deed any time. You can take title to property with the enhanced retained life estate only in your name when you first acquire property, or change how title is held to this format at any time prior to your death. I frequently explore the benefits of doing this whenever I visit with clients about their general estate planning. It has become a key tool in making passage of real estate as easy and inexpensive as possible on your death and for the beneficial Medicaid aspects as well.
How To Get Started
The use of this estate planning tip is something that should be explored with an attorney because of its potentially huge benefits. If you would like to discuss the possibility of including such transfer your estate plan, please contact Adair M. Buckner to schedule a free initial consultation*.
*(The free consultation does not cover actual review of documents or giving legal advice on a specific situation.)
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