Lady Bird Deed and Medicaid Estate Planning

[smutlydog]

What is the name of your state? Texas

About 4 years ago my 90 year old dad had all his real-estate including several ranches and homes willed to me and my siblings via lady bird deed. He now is in need of nursing care services and his pension will roughly cover half of the cost. He told us 4 years ago the attorney told him these assets would be protected. Yesterday someone told me the assets are protected from Medicaid recovery and not qualification. I am fuzzy as to what that distinction means for the estate and how exposed the assets are.

 

[Taxing Matters]

You'd better consult an elder law attorney in the state where your father lives. A lady bird deed is only available in a handful of states (including Texas) but the rules for them and how Medicaid benefits will be affected and whether the state will take back the assets to pay for any Medicaid benefits he does receive vary from state to state. A lady bird deed is a deed in which ownership of the property passes to the grantees (you and your siblings) when the grantor (your father) dies. That means that he still owns the properties and those properties are not yet yours. Furthermore, he can revoke the deeds during his lifetime and decide to do something else with them in his estate plans. These features are great for a lot of things but there is a potential that the state may either deny benefits for some period of time to account for the transfers and/or that the state recovers the medicaid benefits from the properties after he dies. Read the following article for a fairly good description of how Lady Bird deeds work. You'll need to see an elder law attorney in his state to review the facts and tell the exact impact that these deeds will have on his Medicare benefits and what the state can recover after he dies.

 

[LdiJ]

The lookback period is also 5 years and you mentioned that it has only been about 4 so that is an additional wrinkle.

 

[Taxing Matters]

The lookback period is also 5 years and you mentioned that it has only been about 4 so that is an additional wrinkle.

You're right that the five year lookback period is important to the Medicaid planning. However, because Lady Bird deeds do not transfer ownership of the property until the owner dies, the look back period on any properties held with Lady Bird deeds hasn't even started yet. For the father's personal residence that may not be a big deal and may actually work well for estate planning purposes. But retaining ownership of other property via a Lady Bird deed very likely will be a roadblock to getting approved for Medicaid benefits. They really do need to see an elder law/estate planning attorney for this one; the exact details of everything he owns now or had owned in the last five years is going to be a significant factor in the planning. Their situation is more complex than most.

 

[commentator]

He can certainly find out a lot from the local Medicaid administering agency. They'll be happy to explain the process and how it would work, and they'll be able to tell the family whether doing anything related to changing ownership might be regarded, and how they would regard the deeds now in place, etc. Their information would be helpful. The care places usually have social workers who can provide lots of information about this as well.

I think what this family is looking at is that father will likely not be qualified for Medicaid, will have to receive the care and treatment he needs either at one of their homes or with someone having to pay the medical bills. But since this is the state which has this particular kind of deed, and they'll be quite familiar with this unique kind of deed, the agency will be able to tell them whether the lookback period is going to be a year or be for the upcoming five years, whether Medicaid will even be an option.

 

[stealth2]

Are any of you/your siblings legally considered disabled? After my Dad passed, Mom's lawyer told us that the Medicaid look-back period doesn't apply if the property is transferred to someone who is legally disabled (I verified with another atty). (I'm not sure whether the property needs to be the disabled person's residence). This was in NJ, but might be worth asking your Dad's atty.

 

[commentator]

Yes, this is a federal thing, disabled children regardless of age who have been residing with the parent (I believe to be required) are not unhoused by Medicaid. Best source of information on all this is Medicaid.