If you want to protect your property and avoid probate…
A Lady Bird Deed. Or a Lady Bird Trust.
You hear those terms tossed around as simple fixes for complex financial situations with aging parents. But one is actually a misnomer. And the other is very important but doesn’t apply to as many things as some people expect.
Keith Leuty is a lawyer in Texas with Barnett & Leuty, P.C. He talks with Kim and Mike Barnes of Parenting Aging Parents about the Lady Bird Deed – why it can be so valuable for any home owner who wants to protect their assets and how it’s a piece in the puzzle that we call Medicaid.
*A Lady Bird Deed is a type of life estate deed that transfers property without the need for probate. Lady Bird Deeds are currently only authorized in a few states including Texas, Florida, Michigan, Vermont and West Virginia. If you’re in another state you can see if your state offers a Transfer on Death (or beneficiary) Deed.
Read the full transcript
Transcript of Interview: “A Lady Bird Deed”
Mike Barnes:
Yeah, I think in so many ways there’s a lot of confusion about what you need as you’re planning for the future, especially with your money, your house, and everything that you own. As we’re trying to help our aging parents, your eyes can start crossing. So, we’re going to bring in Keith Leuty from Barnett and Leuty. He is a lawyer who does a lot of estate planning, and we’re so excited to talk today about the Lady Bird Deed. It’s something that we hear people say, “Oh, you just need a Lady Bird Deed,” and so many people don’t know exactly what that is. We want you to share that with us.
Keith Leuty:
All right, thanks, Kim and Mike, for having me on. Lady Bird Deeds are probably my favorite legal document out there, and it’s one that nobody knows anything about. Whenever we go somewhere and speak, I’ll ask the audience to raise their hand if they’ve ever heard of a Lady Bird Deed, and nobody ever raises their hand. It’s such a valuable estate planning tool. Essentially, what it does is it allows you to transfer ownership of real estate without having to go through the probate process. It speeds everything up and can save you a lot of money and time.
Kim Barnes:
Now, some people call it the Lady Bird Trust. Is that a misnomer?
Keith Leuty:
Yes, that is a misnomer. It is a deed. Whenever you own real estate and want to pass it to somebody, there has to be a deed involved, and that’s what this does.
Mike Barnes:
So, it’s only for real estate? It has nothing to do with anything in the bank, any stocks, or anything like that?
Keith Leuty:
Correct. This is just a piece of a bigger plan, but it’s something that a lot of people can benefit from.
Kim Barnes:
Absolutely. I tell people if you own a house, you ought to look into the possibility of getting a Lady Bird Deed. The traditional way of transferring real estate is that you put in your will who you want to inherit your property, and then you go through the probate process, which can take several months and involves lawyers and judges. With a Lady Bird Deed, you sign the document while you’re still competent to do so, file it with the county clerk’s office, and then when you pass away, you don’t have to go through the probate process to transfer that ownership.
Mike Barnes:
So, the benefit of that would be that in the case where the heirs need to sell that house or do things like that, it allows them to get access to it faster? Or does it just make it cleaner?
Keith Leuty:
Both. It probably takes about 30 days because you have to go down to the county clerk’s office with a death certificate and identification. The probate process here in Central Texas usually takes three months, sometimes more. The courts are a little bit backed up, so it can shave several months off the time and also reduce the legal fees.
Kim Barnes:
Does it matter where you live with the Lady Bird Deed? For instance, here in Texas with Lady Bird being famous, is that where it comes from?
Keith Leuty:
I looked that up. It was invented back in the early 70s by a law professor, possibly at Florida State. They named it the Lady Bird Deed because she was in the news back then. There are only a handful of states that actually have Lady Bird Deeds, Texas being one of them. Texas does everything they can to help homeowners.
Mike Barnes:
If you’re in a state where there is not a Lady Bird Deed available, are there other options?
Keith Leuty:
Some states have something called a Transfer on Death Deed, which is very similar. Texas actually has both. Texas passed a Transfer on Death Deed through the legislature five or six years ago, which is very similar to the Lady Bird Deed.
Kim Barnes:
So, if you’re in Texas, which should you choose, or does it depend?
Keith Leuty:
We tend to lean toward Lady Bird Deeds because they’re well-established and have been around for about 50 years.
Mike Barnes:
You said everyone should probably get one. Does it matter when?
Keith Leuty:
Well, the day before you die would be ideal. You can only sign it while you’re living. Once you have one on file, it’s an inactive legal document for the remainder of your life and allows you to pass on that ownership, provided you still own the house. It does not prevent you from selling the house or doing anything else you would normally do during your lifetime.
Kim Barnes:
We’ve seen some people in the group who have brought up questions about qualifying for Medicaid. They say, “Oh, all you need is a Lady Bird Deed, and then you’ll be taken care of.” Does it have anything to do with that?
Keith Leuty:
It does have an important component in Medicaid planning. You can qualify for Medicaid and still own real estate, but if you transfer ownership through the usual probate process, Medicaid can put a lien against that property to recoup some costs. If you use a Lady Bird Deed, they can’t do that because it’s removed from your probate estate.
Kim Barnes:
So, this is definitely part of Medicaid planning?
Keith Leuty:
Yes, it’s usually the first thing we ask a family. If you own real estate and you’re doing Medicaid planning, what’s going to happen with the house? Are you planning to keep it or sell it? This is especially important if it’s a married couple.
Mike Barnes:
So, while it’s a piece of Medicaid planning, the Medicaid planning process is a whole other entity?
Keith Leuty:
Yes, it involves a lot. Lady Bird Deeds are about 10 minutes out of an hour-and-a-half presentation on Medicaid planning. There’s a lot to consider.
Kim Barnes:
So, this is one piece of Medicaid planning, but also something that anyone can do even if Medicaid isn’t part of their parents’ future?
Keith Leuty:
Definitely. The idea is if you can avoid probate, you can save a lot of money and time, and Lady Bird Deeds do both.
Mike Barnes:
If you own more than one property, would you need a Lady Bird Deed for each one?
Keith Leuty:
Yes, you would need a separate deed for each property. If a husband and wife own property together, each one has to sign their own deed since Texas is a community property state.
Kim Barnes:
What’s the biggest question or problem people run into when trying to get a Lady Bird Deed?
Keith Leuty:
It’s not as flexible as some other tools like a will or trust. With those, you can put in “if this, then that” components. A Lady Bird Deed is very static. You name the person you want, and if they die before you, you need to go back and change it. Otherwise, you leave the property to their estate and end up in probate court.
Mike Barnes:
Can you designate more than one beneficiary?
Keith Leuty:
Yes, you can designate as many people as you want, or even a trust or group.
Kim Barnes:
Is it easy to put together and expensive?
Keith Leuty:
It’s easy if you know what you’re doing. We do a lot of them, so it’s easy for us. It’s not terribly expensive compared to other legal fees. It’s one of the more affordable options we have.
Mike Barnes:
Often, it’s part of a bigger plan, which could be more complicated and time-consuming, especially if it involves a Medicaid trust?
Keith Leuty:
Yes, that can definitely be more complex and expensive.
Kim Barnes:
Is there anything we’ve left out about Lady Bird Deeds?
Keith Leuty:
One question that comes up is how it compares to the Transfer on Death Deed. They’re very similar, but a Lady Bird Deed can be signed by your power of attorney, whereas a Transfer on Death Deed cannot. If someone is fighting dementia or Alzheimer’s, their power of attorney can set up a Lady Bird Deed, but not a Transfer on Death Deed.
Kim Barnes:
That’s a good distinction. Great information to know. Keith, you’ve answered so many questions. Thank you so much because you’ve cleared up a lot of confusion.
Keith Leuty:
My pleasure.
Kim Barnes:
There’s always confusion that involves legal and financial stuff. There are so many steps you can take, and sometimes you don’t know which path to go down or even know that they exist.
Mike Barnes:
Remember, if there’s any topic you’d like us to talk about, please let us know at Parenting Aging Parents.
*This transcript is auto-generated. Please excuse any typos or mistakes.