Planning for end-of-life healthcare is stressful even for people who can financially provide services for themselves. This stress is amplified for those people who cannot. Once the arduous Medicaid application process begins, many people become aware of the fact that unpaid care facility fees can result in the loss of their home.
Florida, Michigan, West Virginia, Texas, North Carolina, and luckily, Vermont, allow the use of something called a Lady Bird Deed to protect a person’s primary residence from a claim of unpaid nursing home debt that was paid by Medicaid. In 2020, Vermont passed a law solidifying this deed’s place as a legal mechanism beyond common law.
Many clients find the peace of mind and ease of conveying their primary residences through a Ladybird Deed well worth the cost. The deed can be executed any time before the grantor’s death, given capacity is not an issue. If authority is granted under a properly executed Power of Attorney, the agent named in the Power of Attorney may be able to convey the property through a Lady Bird Deed on the owner’s behalf. Even after signing the deed, the person who owns the property before the transfer retains the rights to sell, lease, mortgage, and use the property freely without approval from the grantee. This is not the case with a standard life estate deed.
In property transfers, the current property owner is referred to as the Grantor. The person to whom the property is being transferred is the Grantee. With the Lady Bird Deed, the property remains in the Grantor’s name until they pass. Upon the death of the Grantor, the property is automatically transferred to the Grantee, and it is transferred without a Probate proceeding.
Another benefit of the Lady Bird Deed is that the state Medicaid office will not consider this a disqualifying transfer in the “five-year look-back” period and the transfer itself will not affect eligibility for Medicaid. Following the death of the Grantor, the state will not claim an interest in the property for payback of nursing home payments made by Medicaid.
Depending on whom you transfer your property to, the conveyance may be exempt from the Vermont Property Transfer Tax. In many cases the Grantor is transferring property (upon their death) to their child (or children) and such scenarios are exempt from the Vermont Property Transfer Tax.
It is important to inform the attorney preparing your deed if the property owner is the Principal under a Power of Attorney or currently under Guardianship. While it may be a straightforward transfer, it is best to consult an experienced attorney. As with any legal mechanism, there are limitations and parameters for each specific circumstance. Aside from possible legal issues, there may be other reasons why a Lady Bird Deed may not be a recommended strategy for some individuals and their families.