In Texas estate planning, we have what’s called a “Lady Bird Deed” (also called an “enhanced life estate deed”). It’s a way to transfer property to another individual outside of probate while retaining a life estate. This strategy for estate planning allows the grantor the ability to sell, convey, or mortgage the property without the beneficiaries’ consent. The beneficiary of the deed doesn’t have any rights to the property while the current owner is alive.
Folks have liked using the enhanced life estate deed (the Lady Bird deed) because it lets you: (i) avoid the costs, stress, and delays of probate; (ii) use and profit from the property during your lifetime; (iii) sell the property at any time; (iv) avoid making a gift that might be subject to federal gift tax; and (V) avoid jeopardizing your Medicaid eligibility. Also, in some states, this deed will prevent the property from being sold after you pass away to reimburse the cost of Medicaid you received.
“Transfer on Death” Deed
Another option in Texas is what is called a “Transfer on Death” (TOD) deed. This deed lets you transfer assets at death to someone else and avoid probate. Avoiding the need for probate saves your loved ones court costs and administrative expenses that are incurred when the property is legally deeded to your beneficiary. In addition, the probate process can be time-consuming and frustrating for those in your family trying to resolve the issues concerning your death and the distribution of your assets.
Under Texas law, using a “Transfer on Death” deed also will exclude the real property from Medicaid estate recovery after you die. Anyone with the capacity to understand what they’re doing can sign a Transfer on Death deed; if a person is found to be incapacitated, the deed will be held invalid. Once you sign the deed, it must be recorded with the county tax assessor/collector’s office before your death. Work with a qualified estate planning attorney to prepare this document and to review your entire estate plan.
You also can use a TOD deed to keep your home out of probate. Some folks will consider a living trust or joint tenancy, but these are more complex and may not be the best options for your particular circumstances. Ask an attorney who practices in this area of law to review your situation and to recommend the best approach.
Texas has its own special rules about TOD deeds, so before you attempt to prepare your deed on your own, consult a knowledgeable estate and trust lawyer. And always remember to keep your estate planning documents up-to-date. You and your attorney should review your plan every few years or when you have a major life event (e.g., marriage, divorce, a new baby or grandchild, or a move out-of-state).
Consider these ideas about Lady Bird Deeds and Transfer on Death deeds, then speak with Texas estate planning attorney Pamela Hailey-Petty by contacting the Hailey-Petty Law Firm in Austin at (512) 910-8977 or email firstname.lastname@example.org. She can help you with any follow-up concerns you have and make sure your estate plan is effective and comprehensive for your sake as well as your family’s.