While Lady Bird Deeds—including Transfer-on-Death Deeds—are popular tools for avoiding probate and simplifying inheritance, it’s a common misconception that they automatically shield property from Medicaid estate recovery. In reality, Lady Bird Deeds do not guarantee protection against Medicaid claims after your death. Read on for more details.
What Is Medicaid Estate Recovery?
When someone receives long-term care benefits through Medicaid, the state may seek repayment after that person dies. This typically comes from the person’s estate—including real estate like a home.
How TOD Deeds Work
A Lady Bird Deed, also known as a Transfer-on-Death Deed, allows you to name a beneficiary who will inherit your property automatically when you die, without going through probate. That’s often seen as an advantage—but not all states define “estate” the same way for Medicaid recovery purposes.
The Key Issue: State Laws Vary
- In some states, Medicaid can only recover from assets that pass through probate. In those states, using a Lady Bird Deed may help avoid estate recovery.
- In other states, the Medicaid program can recover from non-probate transfers too, including property passed through a TOD deed. In those cases, the deed does not protect the home from recovery efforts.
Bottom Line
A Transfer-on-Death Deed may help avoid probate, but it does not always protect your home from Medicaid estate recovery—especially if your state allows recovery from assets that pass outside of probate.
To be safe, it’s important to:
- Review your state’s Medicaid rules
- Consult an elder law attorney familiar with local laws
- Consider other planning tools like irrevocable trusts if Medicaid protection is a top priority
In short: Lady Bird Deeds offer many benefits, but when it comes to Medicaid recovery, they’re not a guaranteed shield.
