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How does Lady Bird Deed Mix with Spousal Homestead Rights?

Dear Mr. Premack: My question concerns the Lady Bird deed. I have read your previous columns about this. I own a home that my wife of 57 years and I built. She died 5 years ago, and I remarried 3 years ago.  I plan to deed this property to my children using the Lady Bird. Does the law concerning widows give any rights to my current wife? It is my separate property. – J.H.H.

When a married couple purchases or builds a home using funds earned during the marriage, that home is their community property. You and your first wife would have owned the home as community property. Your first wife died five years ago, and some issues you did not mention is whether she had a Will, whether it was probated, or if she died intestate.

If your first wife had a Will, if the Will left her half of the house to you, and if the Will was properly probated after her death, then you now own 100% of the house. But if she had no Will, or if her Will did not leave her half to you, or if her Will was not probated, then the question “who owns your first wife’s half of the house?” cannot be answered without more investigation.

Your second wife has no ownership interest in the house – she was not involved until you married her three years ago – but your first wife’s heirs or children may have an ownership interest if your firs wife’s Will was not handled correctly. You do say “It is my separate property” so I am going to assume that your first wife’s half of the house did legally pass to you upon her death (but again, if it did not, then you must fix the ownership problem).

Since your second wife has no ownership interest, you can dispose of the house in any manner you desire with one limitation: you must take into account your second wife’s homestead rights under Texas law. Yes, Texas law concerning widows (better said: surviving spouses) does give rights to your second spouse. She has the legal right to occupy the home after your death. Even if you leave ownership to someone else (like your children) they cannot interfere with her occupancy of the house. She is allowed to reside there until she voluntarily vacates the premises or until her death.

The Lady Bird deed is, when written properly, a fast way to transfer ownership of the house to your children while 1) reserving to yourself “life estate”, 2) reserving to yourself the right to revoke the deed, and 3) providing protection for the house from the Medicaid Estate Recovery Program, in the event that you are even in a nursing home which is being paid for under the Medicaid program.

Texas law does not allow you to encumber your homestead without your spouse’s agreement and joinder. She can voluntarily waive her rights in a written agreement, giving up all of her homestead rights. Otherwise, if you desire the Lady Bird deed to be valid, she will need to sign the Lady Bird deed to show that she accedes to its terms, even though she has no ownership interest in the house. And when you eventually die, she will have the right to continue to occupy the house even though the deed leaves legal ownership to your children.

During the period of her occupancy, there are complex issues that must be addressed. For instance, how will the real estate taxes be paid, and by whom? Who will pay to insure the premises, or pay for repairs when necessary? There are laws that provide answers, but it is always better if your second wife and your children have a written agreement in place before you die. A Lady Bird deed, while a good tool in some situations, is NOT a good place to address those issues. You, your second wife, and perhaps your children should all visit with a Certified Elder Law Attorney before you take any action regarding the Lady Bird deed and associated legal issues.

Paul Premack is a Certified Elder Law Attorney and a Five Star Wealth Manager (Texas Monthly Magazine 2009-2012) practicing estate planning and probate law in San Antonio.

Original Publication: San Antonio Express News, June 4, 2013


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