The Hidden Tradeoffs of Lady Bird Deeds

You own your home and for many families, it’s the most valuable asset they have. Maybe you’ve heard about Lady Bird Deeds and how they can help avoid probate and protect your home for your children. A friend mentioned it. You saw a post online. Or you were told it’s simple, inexpensive, and effective.

And that’s all true. Lady Bird Deeds can be powerful tools for protecting your home.

But here’s the part that often gets left out: a Lady Bird Deed on its own is not a complete estate plan. When it’s used without understanding its limits and what it doesn’t protect, it can leave your family exposed in ways you never intended.

In this article, I’ll walk you through what Lady Bird Deeds actually do, when they work well, where the gaps are, and why real protection comes from comprehensive planning, not just a single document.

How Lady Bird Deeds Work

A Lady Bird Deed (also called an Enhanced Life Estate Deed) allows your home to pass automatically to the beneficiaries you choose when you die without going through probate. That means your children or other beneficiaries receive the property directly, avoiding the delays, costs, and public court process that probate requires.

For many families, that probate avoidance alone is a big deal. Probate can easily take 12–18 months (or longer), cost thousands in legal and court fees, and involve a lot of paperwork and hearings. A Lady Bird Deed removes your home from that process. When you die, your beneficiaries typically just record a death certificate, and ownership transfers to them. (Important note: this only applies to the home, other assets may still require probate unless you’ve planned for those too.)

Another major advantage? You keep full control while you’re alive. Unlike a traditional life estate deed, a Lady Bird Deed lets you sell, refinance, mortgage, or even change your mind about who inherits the property no one else’s permission required. That flexibility matters if you later decide to move, downsize, enter assisted living, or explore something like a reverse mortgage.

In states that recognize Lady Bird Deeds like Florida they can also provide protection from Medicaid estate recovery. Because the home passes outside of probate, Medicaid generally can’t pursue it after death. For many families, that can mean preserving tens of thousands of dollars instead of losing the home to recovery claims.

There’s also a meaningful tax benefit for your beneficiaries. They receive a step-up in basis, meaning the home’s tax value resets to its fair market value at the time of your death, not what you originally paid. If they later sell the property, that can translate into significant capital gains tax savings.

Lady Bird Deeds and Medicaid: What to Know

One of the biggest reasons people get excited about Lady Bird Deeds is how well they protect a home without blowing up Medicaid eligibility. And if long-term care is even a maybe in your future, this matters a lot.

Medicaid can cover nursing home and certain assisted living costs, but only after you’ve spent down most of what you own. In most cases, you can’t have more than about $2,000 in countable assets. While you’re alive and living in your home, the house is usually exempt. The real problem shows up after you die.

In states like Florida that recognize Lady Bird Deeds, Medicaid estate recovery programs try to get reimbursed for the cost of your care after your death. If your home goes through probate, the state can make a claim against it and that can mean a forced sale, with little or nothing left for your kids.

This is where the Lady Bird Deed really shines. Because the home transfers outside of probate, Medicaid estate recovery can’t touch it. The property passes directly to your beneficiaries, protected from those claims. For many families, that can mean preserving tens or even hundreds of thousands of dollars.

There’s another major win here: no Medicaid look-back penalty. Medicaid reviews transfers made within the five years (60 months) before you apply. Transfers during that window can delay your eligibility. But a Lady Bird Deed isn’t considered a transfer at all, because you keep full ownership and control. You can sign the deed today and apply for Medicaid tomorrow without triggering a penalty.

That’s very different from other strategies. Gifting your home outright or using a traditional life estate deed does trigger the look-back and can leave you temporarily ineligible for benefits. Lady Bird Deeds sidestep that problem entirely.

That said and this is important, a Lady Bird Deed only protects your home. It doesn’t solve Medicaid eligibility if you have too much cash, investments, or other non-exempt assets. Those still need to be addressed with proper planning.

The Hidden Risks of Relying on a Lady Bird Deed Alone

A Lady Bird Deed is a great tool for protecting your home but it’s only one tool. On its own, it leaves some pretty big gaps in your overall estate plan. Knowing where those gaps are is what separates “I signed a document” from “my family is actually protected.”

First, a Lady Bird Deed only covers real estate. That’s it. Your bank accounts, investments, vehicles, personal belongings, and everything else you own still need their own planning. I regularly meet families who thought they were “all set” because they had a Lady Bird Deed only to discover their loved ones still had to go through probate for everything else.

Second, a Lady Bird Deed does nothing if you’re alive but incapacitated. It only works at death. If you have a stroke, develop dementia, or are injured in an accident, the deed offers zero help. Without properly drafted powers of attorney, your family may be forced into court just to pay bills or manage your property exactly the stress you were trying to avoid.

Third, a Lady Bird Deed doesn’t explain your wishes. When your beneficiaries inherit your home, do they know what you wanted? Keep it in the family? Sell it and split the proceeds? Rent it out? Without guidance, even loving families can disagree and conflict often shows up at the worst possible time.

Fourth, life happens and a Lady Bird Deed doesn’t adapt on its own. If a beneficiary dies before you and the deed isn’t updated, your home may end up in probate anyway. If a beneficiary divorces, faces creditor issues, or becomes incapacitated, things can get complicated fast.

Fifth, Lady Bird Deeds don’t protect your beneficiaries after they inherit. The home passes outright, meaning it’s exposed to lawsuits, creditors, divorce, or financial missteps. Once it’s theirs, it’s fair game.

The strongest plans don’t rely on a single document. They layer protection. That usually means pairing a Lady Bird Deed for the home with a will or trust for everything else, financial and healthcare powers of attorney for incapacity, clear healthcare directives, guardianship nominations for minor children, and thoughtful planning for beneficiaries with special needs or unique challenges.

Think of your estate plan like a puzzle. A Lady Bird Deed is an important piece but it’s not the whole picture. Relying on it alone is like building a house with a great roof and no walls. The roof matters… but it won’t protect much on its own.

Start Protecting the People You Love—Today

If you’ve been told a Lady Bird Deed is “all you need” or you already have one and assumed your planning box was checked, it may be time for a smarter next step. A Lady Bird Deed can be part of a solid plan, but it’s rarely the whole plan. As a Personal Family Lawyer® Firm, we help you create a Life & Legacy Plan that keeps your loved ones out of court, out of conflict, and supported when it matters most.

That’s why I always begin with a Life & Legacy Planning® Session before drafting a single document. In this session, we build a complete inventory of everything you own and walk through exactly what would happen if you became incapacitated or passed away today. Then I explain your options clearly, so you can make informed decisions based on your family, your assets, and your real-life priorities, not fear, pressure, or guesswork.

This approach means you’re not just signing documents because someone said you should. You’re creating a plan that actually works when your loved ones need it to.

Ready to take the next step?
Click here to schedule a complimentary 15-minute discovery call and let’s talk about protecting the people you love: https://pages.20westlegal.com/schedule/meeting

This article is a service of 20WestLegal LLC. We don't just draft documents; we ensure you make informed and empowered decisions about life and death for yourself and the people you love. That's why we offer a Planning Session, during which you will get more financially organized than you've ever been before and make all the best choices for the people you love. You can begin by calling our office in Sudbury, Massachusetts today to schedule an Estate Planning Session and mention this article to find out how to get this $750 session at no charge.

The content is sourced from Personal Family Lawyer® for use by Personal Family Lawyer® firms, a source believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own separate from this educational material.