Can Medicaid Take Your Home? Transfer on Death vs. Lady Bird Deeds

One of the most common fears for homeowners is losing their house to pay for long-term care. A frequent question we receive is: "I filed a Transfer on Death on my home, bank account, and car titles. Can Medicaid still go after my home if I enter a nursing home?"

The short answer is: It depends entirely on the state you live in.

If you are trying to protect your assets from Medicaid recovery, understanding the specific tools available in your state—like Florida's "Lady Bird Deed"—is critical.

Quick Summary: Medicaid and Your Home

• The Risk: Medicaid rules determine what the state can "reclaim" to pay back services provided during your lifetime.

• The Solution (Florida): An Enhanced Life Estate Deed (Lady Bird Deed) avoids probate and protects the home from Medicaid recovery.

• The Danger: DIY methods, like adding a child to a deed, can trigger penalty periods and disqualify you from Medicaid coverage.

What is a Lady Bird Deed? (Enhanced Life Estate Deed)

In Florida, residents can utilize a powerful tool known as an Enhanced Life Estate Deed, commonly called a Lady Bird Deed.

According to Florida law, this deed functions similarly to a Transfer on Death deed but with specific protections:

1. Retain Control: The property remains with the current owner (or married couple) during their lifetime.

2. Immediate Transfer: Upon the death of the owner, the property transfers immediately to the named beneficiary.

3. Avoids Probate: Because the transfer happens immediately upon death, the home stays out of the court process known as probate.

4. Medicaid Protection: Once the home transfers to the new owner, it is outside the scope of Medicaid reclaiming. Medicaid cannot come after the home to satisfy payments for previously provided services.

Note: Florida has extraordinary protections regarding Homestead Property. It is considered one of the most protected assets available.

Why "Transfer on Death" Might Not Be Enough

While a Transfer on Death deed is a valid tool, it may not be the right planning for everyone. You must look at two factors:

1. Your State’s Homestead Rules: What privileges attach to homestead property in your specific location?

2. Your State’s Medicaid Rules: Can the state make a claim against the property or force a sale to repay medical services?

If your state allows Medicaid to make a claim against a standard Transfer on Death deed, you need to consult an elder law attorney to explore other options, such as a Medicaid Asset Protection Trust.

The Costly Mistake of DIY Asset Protection

We often see people attempt to save money by handling asset protection themselves, only to create a much bigger mess. A common error involves real estate.

The "Gift" Trap

Many people simply add a child’s name to their deed to avoid paying a professional to draft a correct Lady Bird Deed. This is a dangerous mistake.

• The Lookback Period: Medicaid views adding a child to a deed as a "gift."

• The Penalty: If you make this gift within 60 months (5 years) of needing Medicaid, the state counts that asset against you.

• The Consequence: You will face a penalty period where you must pay out of pocket before qualifying for Medicaid.

Is Hiring an Attorney Worth It?

While simple tasks like adding beneficiaries to bank accounts or car titles (if allowed in your state) are great DIY options, protecting a home requires professional advice.

In Florida, proper Medicaid qualification planning can save an average of $10,000 a month in long-term care costs. Spending a few hundred or thousand dollars to ensure a large asset like your homestead is truly protected is often more cost-effective than the "savings" of doing it yourself.

Key Takeaways

• Location Matters: Medicaid recovery rules vary significantly by state.

• Florida Residents: Look into the Lady Bird Deed to avoid probate and Medicaid recovery.

• Avoid Gifting: Do not just add names to deeds without legal advice; it can trigger a 5-year lookback penalty.

• Seek Expert Help: If you are in Florida and have questions about elder law, estate planning, or asset protection, reach out to a professional to avoid costly mistakes.

If you are in Florida and need assistance with Medicaid qualification or asset protection, contact our team for a Free Consultation at atCause Law Office today.