Lady Bird Deeds and Medicaid: Not a Gift, No Penalty, and (Sometimes) No Recovery

Guides › Medicaid and Your House

Updated July 31, 2026. Quick answer: a Lady Bird deed (enhanced life estate) is the rare tool that beats BOTH Medicaid clocks at once — in the minority of states that recognize it, most prominently Florida, Texas, and Michigan. Because you keep the power to sell, mortgage, or revoke without the beneficiary’s consent, signing one is not a completed gift — no look-back penalty, ever. And because the house passes by deed at death, it skips probate — which in probate-only recovery states generally puts it beyond estate recovery too. Full step-up in basis at death, no penalty at signing: the adding-a-child-to-the-deed move done right.

The catches, honestly

State availability is the whole game: only a handful of states recognize enhanced life estates with settled title practice; in the rest, title companies will not insure them, which makes them useless in practice. (Standard TOD deeds — available in most states — do the probate-skipping half of the job, though a TOD designation does not carry the same not-a-gift analysis everywhere; the look-back result is the same because nothing transfers until death.) Expanded-recovery states may reach non-probate transfers regardless of deed type. And a Lady Bird deed does nothing about the look-back for OTHER assets — it is a house tool, not a plan. Where the deed is unavailable and the facts fit, the caregiver-child exemption is the other penalty-free path for the home.