Dear Mr. Premack: My mother signed a deed transferring
her home to us (her children) and retaining a life estate for herself. She
also retained the right to change her mind and take back ownership of the
house. She recently died, and left the deed unchanged (she never took back
ownership). Do we need to probate her Will before we can sell the house?
The life estate deed was drawn up by her lawyer in Houston. – NG
The type of deed you describe is sometimes called an “enhanced life
estate” or a “lady bird deed”. The myth is that Lady Bird Johnson once
used a similar arrangement, and even though no one has been able to
validate that theory, the name has stuck.
Lady Bird deeds are
used most often when the homeowner might need to qualify for Medicaid
benefits, and desires to shelter the home from an estate recovery claim
after her death. The legalities behind this concept are complex, but at
least for now this technique works to preserve the house for the surviving
Medicaid aside, there are other benefits to a Lady
Bird deed. First, the holder of the life estate (your mother) may continue
to treat the property as her homestead. Her local property taxes will not
go up because the transfer to the children is effective only upon her
Second, the holder of the life estate will not have to
pay any gift tax on the transfer, because the retained right to take back
ownership zeros out the value of the gift. If she decides to rescind the
transaction, the kids receive nothing. If she leaves it alone until the
moment of her death the children are technically inheriting the property,
not receiving it as a gift.
Third, and to the point of your
question, so long as the right to rescind is not exercised then
immediately upon the death of the life estate holder, the children own the
home outright. Probate is not necessary to establish their claim to
ownership. Instead, they can simple present to the purchaser (and the
title company that will be insuring the transaction) a copy of the Lady
Bird deed and a certified copy of the death certificate.
were not planning to sell the house, then I would recommend that a proper
legal Affidavit be filed with the County Clerk’s real property records.
The Affidavit would state that the holder of the life estate (mother) has
died, and that consequently the children should be treated as owners of
the property. A copy of the Affidavit (and the deed and death certificate
if necessary) could be presented to the local Appraisal District to have
the tax account changed over to the children’s names as the new owners.
Dear Mr. Premack: I looked through your column
archives at Premack.com and did not find an article that addressed my
question. Can a nursing resident who receives Medicaid gift or transfer
her home to one of her children (61 years old and receives SSDI) without
impacting either of their benefit situations? Thank you. -- BLW
SSDI stands for Social Security Disability Insurance, which is a benefit
for disabled adults who qualify under the federal rules. Medicaid is a
different program, which in this context is providing nursing home care to
an impoverished senior citizen.
Ordinarily a Medicaid beneficiary
would be disqualified from receiving continued aid if she transferred
title to the home to anyone (including one of the children). The
beneficiary is allowed to continue owning the house so that she will have
a place to go if her health improves. If she decided not to keep the house
for that purpose, then transferring it to anyone else creates a penalty
period during which she cannot receive Medicaid benefits.
are, however, a few explicit exceptions to that rule. One of them is this:
if the house is transferred to a child (of any age) determined to be
disabled under the Social Security rules, there is no penalty. In this
case, your mother could transfer the house to her disabled daughter and
still retain her Medicaid benefits. And since SSDI does not use its
beneficiary’s resources as a measure of whether or not benefits will
continue, becoming owner of the home will not negatively impact her