December 8, 2017

Lady Bird Deeds in Texas: An Often Overlooked Opportunity

Probate Law Blog

Houston Probate Attorney

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In the states that allow them, such as Texas, Lady bird deeds are a relatively simple and useful tool that should be used more often. The In re Estate of Maggie Williams Turner, No. 06-17-00071-CV (Tex. App.–Texarkana 2017), case provides an opportunity to consider the benefits of these types of deeds.

Facts and Procedural History

Ms. Turner owned 13 tracts of real estate in Texas. Before her death, Ms. Turner executed a Lady Bird deed (AKA an Enhanced Life Estate Deed). The deed transferred the property to Mr. McIntosh but allowed Ms. Turner to continue to retain all rights in the property during her lifetime, including the power to sell the property without Mr. McIntosh’s permission, with the property passing to Mr. McIntosh upon her death if the property was not sold prior to this.

Four years later, Ms. Turner transferred the property to her limited liablity company. She did so without Mr. McIntosh’s permission.

Ms. Truner died and the property was part of her probate estate. Litigation ensued with Mr. McIntosh and the personal representative for the estate. The trial court concluded that Mr. McIntosh did not have any intrest in the real property. The appeals court affirmed the trial court.

Lady Bird Deeds in Texas

Lady Bird deeds do just what was described above. They allow a person to transfer property out of their name, but enjoy the benefit of the property during their lifetime and still retain the ability to sell the property.

Ladybird Deeds are often used to qualify for Medicaid or for other asset protection purposes. They are also used to prevent the government from recouping Medicaid benefits as the property is not a probate asset included in the probate estate.

The deeds also do not trigger Federal gift taxes as they are not completed gifts. They do not void Texas homestead tax break for the same reason.

Lady Bird deeds are not valid in many states. The appeals court in this case confirmed that Lady Bird deeds are valid in Texas.

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