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Michael Bradley
Michael Bradley,
Category: Legal
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Experience:  Owner at The Protection Group LLC
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My mother had a Lady Bird deed drawn up some 6+ years ago

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Hi, my mother had a Lady Bird deed drawn up some 6+ years ago leaving the home to us. We have been living in the home and caring for her as well. Recently she broke her leg and entered rehab, there is a chance she might need to move to a care facility permantly. She is wanting to transfer the home to us now. The reason being we are wanting to take out a home improvement lone, the house needs some major fixing up and a home loan is the only way we can afford it. And the only way we can do this is if the home is in our name. And
JA: Have any legal documents been drafted or filed?
Customer: can she she do this without hurting her Medicare?
JA: Estate planning laws vary by state. What state are you in?
Customer: Texas Yes we have a lady bird deed
JA: Anything else you want the lawyer to know before I connect you?
Customer: No I think that covers it

and I am assuming your mother can not qualify for the home loan on her own?

can you send me a copy of the deed?

A Texas Lady Bird Deed—also known as Enhanced Life Estate Deed—is a Life Estate Deed coupled with the power to sell, convey, or mortgage the real estate without the remainder beneficiary’s consent.

Lady Bird Deeds provide all benefits of traditional Life Estate Deeds: They allow the current owner to retain a life estate interest and pass the property to the remainder beneficiaries without going through probate. But unlike traditional Life Estate Deeds, Lady Bird Deeds do not create an irrevocable interest in the remainder beneficiaries.

With a Lady Bird Deed, the owner/life tenant reserves:

  • The right to take the property back;
  • The right to mortgage, lease, sell, convey, and otherwise dispose of the real estate without involving the remainder beneficiary;
  • The right to keep or spend the proceeds from any mortgage, lease, or sale of the property without giving any part of the proceeds to the remainder beneficiary; and
  • The right to add or remove remainder beneficiaries during the owner/life tenant’s lifetime.

The reservation of these rights distinguishes Texas Lady Bird Deeds from traditional Life Estate Deeds. A Texas Lady Bird Deed provides all benefits of a traditional Life Estate Deed without forfeiting control over the property.

what she would be giving up potentially...

Texas Lady Bird Deeds provide several important benefits that distinguish them from other Texas deed forms:

  • Avoiding Texas Probate – Texas Lady Bird Deeds transfer property automatically at a deceased owner’s death. Because the transfer is complete at the time of death, Texas probate is not legally required. This avoids the delay, cost, and privacy concerns associated with Texas probate.
  • Medicaid Asset Protection – Texas Lady Bird Deeds can preserve Medicaid eligibility during the owner’s life. They can also prevent the property from going to the government at the owner’s death under the Texas Medicaid Estate Recovery Program.
  • Retaining Homestead Exemption – Because an owner who creates a Lady Bird Deed retains full control over the property during his or her lifetime, the property retains its homestead status. This allows the owner to take advantage of the favorable property tax and asset protection exemptions available to Texas homestead.
  • Avoiding Capital Gains – Because a Lady Bird Deed does not create a completed gift for federal tax purposes, the owner/life tenant is treated as retaining the property until his or her death. As a result, the remainder beneficiary will receive a “stepped-up basis” for income tax purposes. A stepped-up basis erases any appreciation in the property that occurred prior to the deceased owner’s death. This can create a substantial income tax savings when the remainder beneficiary sells the property.
  • Retaining Control – Unlike traditional Life Estate Deeds or outright transfer of the property (such as a joint tenancy with right of survivorship), Texas Lady Bird Deeds allow the owner to retain control over the property. If the owner changes his or her mind or new circumstances arise, the owner has the flexibility to change the transfer without involving the remainder beneficiary.
  • Saving Money – The benefits of Lady Bird Deeds could also be accomplished through a Texas living trust. But preparation of a Texas Lady Bird Deed is less expensive than the cost of preparing a Texas will or living trust. This can result in a substantial lifetime savings to the owner. And because Lady Bird Deeds save probate costs at the owner’s death, the savings can also benefit the owner’s heirs or other beneficiaries.

transferring the property is not going to affect her Medicare per se. The only issue will be if she passes away within the look back period then Medicare may look for payment of it's bills, if any. The Lady Bird prevented that from happening but if it is transferred to you it could be exposed.

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