When using a Lady Bird deed, the Grantor is also able to retain the right to live on the property until their death, at which point ownership transfers to the Grantee without going through probate. The difference with the Lady Bird deed is that the Grantor retains their right to sell or mortgage the property. The primary purpose of a Lady Bird deed is to avoid probate after the Grantor’s death, but there are several additional benefits.

Benefits

1. The ability to sell or mortgage the property
2. The ability to cancel the deed
3. The ability to qualify for Medicaid benefits for long-term care
4. Retention of state homestead rights and property tax limitations
5. Avoiding federal gift tax
6. Protecting the property from claims made against the Grantee during the Grantor’s lifetime

The Lady Bird deed can be a useful tool for those who may someday wish to apply for Medicaid benefits to cover the costs of long-term nursing care. In order to qualify for Medicaid benefits, an individual’s assets must be valued under certain set limits. If an applicant uses a traditional life estate deed to avoid probate within five years of applying for Medicaid, it will be considered a “transfer” of the asset – possibly disqualifying the applicant from Medicaid. With the use of a Lady Bird Deed, the home’s value will not be considered a transfer. The Lady Bird deed allows the Grantor to avoid probate court. When a Medicaid recipient dies, Medicaid has the right to make a claim against their probate estate to recover the amount of benefits paid out for long-term care and services. Since the Lady Bird deed keeps the property out of probate, the home is not part of the probate estate and cannot be accessed by Medicaid for reimbursement.