[ijusluvit]

Originally Posted by jimbo2012

A Lady Bird deed may be a good idea if you think you might need Medicaid, the joint state-federal program that helps many Americans with nursing home costs. It may help preserve your eligibility for Medicaid and keep assets in the family that otherwise would be taken by the state to repay the cost of Medicaid benefits you receive during your life.

These deeds have some drawbacks, however, and they are used only in a few states.
How a Lady Bird Deed Works

These deeds are also called “enhanced life estate” deeds. With a standard life estate deed, you could name a beneficiary to inherit your property while you keep ownership of it for your lifetime, but with significant restrictions. You wouldn’t have the right to sell or mortgage the property, and you might also be liable to the beneficiary you named if you greatly decreased the value of the property—for example, let a house fall into serious disrepair.

By contrast, an enhanced life estate deed (the Lady Bird deed), lets you:

avoid probate of the property
keep the right to use and profit from the property for your lifetime
keep the right to sell the property at any time
avoid making a gift that might be subject to federal gift tax
avoid jeopardizing your eligibility for Medicaid
in some states, prevent the property from being sold, after your death, to repay the cost of Medicaid benefits you received

Medicaid Eligibility

Medicaid benefits are intended for people who can’t otherwise pay for their medical care. So if you apply for benefits, you must say how much money and property you have. Some assets, however, aren’t counted for purposes of Medicaid eligibility. Typically, your primary residence isn’t counted when Medicaid adds up the value of your resources. It may be completely exempt, or exempt up to a certain value. For example, if your state exempts residences up to $750,000, then any value above that amount will be counted as a resource belonging to you.

When you apply for benefits, you must also disclose any assets you’ve given away in the previous few years, called the “look-back” period. Otherwise, people could simply give away their valuable assets to family members, claim poverty, and receive Medicaid benefits. If you’ve given away valuable property, it may disqualify you from receiving benefits for a certain period of time.

For example, if you had transferred your house to your daughter within the look-back period, it could make you ineligible for benefits. If, however, you had executed only a Lady Bird deed, it wouldn’t be considered a transfer that you had to disclose to Medicaid. That’s because you keep complete control over the property. So if your state doesn’t count the value of your residence for purposes of Medicaid eligibility, your continuing ownership won’t make you ineligible for benefits.

The Drawbacks:

Complications may arise when there are multiple owners or multiple beneficiaries.

The deeded property remains in the owner's estate for estate tax purposes.

If the deed is recorded, it reveals publicly who will receive the property at death.

The life tenant could mortgage, encumber, or convey the property before the beneficiary receives it.

The beneficiary could predecease the life tenant and a title company could require probate of the beneficiary's estate by interpreting the remainder interest as being vested subject to divestment.

The life tenant could predecease the remainderman causing judgments against the remainderman to attach to the property.

In the absence of case law or statutes in certain jurisdictions, title companies may not answer specific issues, leaving unresolved questions

.

Jimbo,

Lots of good information here. Thanks. However, your first three paragraphs seem to contradict the remainder of your treatise. The remaining info looks good, except your mention of multiple beneficiaries possibly being a drawback. This would not be the case as the named beneficiaries on the deed are entitled to an equal share unless otherwise stipulated. Nothing unclear about that. When the deed is drafted you also can choose whether or not the heirs of any pre-deceased beneficiary would be included.