Ladybird deeds, which are commonly used to avoid probate and to avoid claims by the state if the property owner receives Medicaid benefits, are under attack. This is a red flag to all Texans whose biggest asset is their home and who have inadequate insurance coverage for long-term care. Representative Jessica Farrer, a state representative from Houston, plans on filing a bill with the state legislature based on the Uniform Transfer on Death Deed Act, whereby the personal representative (i.e., an executor or administrator) of an estate may enforce liability for claims against the estate, expenses of administration, or taxes owed by the estate - even if the property does not pass as part of the probate estate. In other words, an executor could exceed the authority under present law to pursue a claim. The mere permissive ability to seek liability would likely have a chilling effect on this type of title transfer since title companies can pick and chose who they want to insure. Title companies may not want to risk liability.
Under present Texas Medicaid rules, the state only goes after exempt resources (such as an applicant’s home) that pass by probate. Since the Ladybird deed passes the homestead or other real property by deed (and not by probate) it avoids Medicaid estate recovery to the extent benefits have been advanced. Although it is presumed that Rep. Farrer’s intentions are admirable, if this bill passes it will cast a blind eye on Texas’ history of being a strong homestead state. Offering homes of Texans as a sacrificial lamb to achieve whatever political goal that is desired could very likely be detrimental to her own constituency for whom she represents. In response, there may be a need for Texans with homesteads and inadequate long-term care insurance coverage to consider other options including planning with certain types of trusts. We will keep you advised on the progress of this bill.