When you put together an estate plan, you have many things to consider. One of the most pressing is what happens if you or your spouse must go into an assisted living facility, and you cannot afford it without Medicaid.
Long-term care facilities range in dollars and quality of care. If you and your spouse have not planned properly, the one left behind may wind up paying dearly. Texas is one of three states that allow a Lady Bird deed, which protects the remaining spouse from losing the marital home.
The basic premise of a Lady Bird deed
When a person dies, the estate typically goes through the probate process if he or she grants another person a piece of property in the will. Part of the reason for probate is to determine if the deceased has any outstanding debts that warrant the sale of the property instead of the transfer. In some situations, this could leave a spouse or family member out on the street.
The Lady Bird deed allows a person to directly convey property to another upon his or her death without the need for probate. Therefore, a surviving spouse is not in danger of losing the marital home.
Lady Bird deed and Medicaid
Creating a Lady Bird deed is beneficial to a surviving spouse, especially if the deceased used Medicaid to help pay for long-term care. Medicaid can place a five-year hold on all property the deceased owns, meaning a transfer upon death may not go through. However, a Lady Bird deed is a transfer in the eyes of the law, and therefore the hold by Medicaid does not apply.
Medicaid puts this hold on property in an effort to recoup some of the money it paid for the deceased’s care. It acts as a lien and diverts money from beneficiaries to Medicaid.
Planning for your later years is critical. You do not want to find yourself in a bad financial situation upon the death of a loved one.