What Does Medicaid Do If We Sell a House in a Life Estate?

 In Long-Term Care Planning


My mother has a life estate in her home through a Lady Bird deed. It is her desire that the house go to me, her only child. I am also her agent under her durable power of attorney. If she has to get on Medicaid and live permanently in a nursing home, it is our understanding that I can continue to live in the house for as long as I choose because we have a Lady Bird deed. I am wondering, if I decide to sell the home at some point, is the government going to come after me to seize the home or profits from the sale? We are in Wichita Falls, Texas. She is currently in a nursing home on Medicaid but the government knows she is there temporarily.


Photo by Glen Carrie on Unsplash


Your understanding is correct. You can stay living in the house and it will pass to you free and clear of any Medicaid lien after your mother passes away. However, selling the house during your mother’s life could be a problem for two reasons. First, at least some of the proceeds will go to your mother and she will no longer be eligible for Medicaid. Second, the state may make a claim against the sale proceeds for reimbursement of what it has already paid out for your mother’s care.

A Lady Bird deed is a form of a life estate deed that exists in three states: Florida, Texas and Michigan. It permits the owner to retain the right to mortgage and sell the property without the consent of the the remaindermen—the people who receive the property upon the death of the life estate owner. With typical life estates, the sale proceeds are divided between the life estate owner and the remaindermen based on the age of the life estate owner—the older she is, the smaller her share, since she’s unlikely to retain possession for as long. You can earn more about life estates here.

If your mother’s house were in a typical life estate and you sold it, your share of the proceeds would not be subject to claim by the Texas Medicaid agency. I am not sure that that’s the case with a Lady Bird deed given your mother’s enhanced rights. I recommend that you consult with a Texas elder law attorney to be certain of the results. You can find one at www.elderlawanswers.com.

Related Articles:

What Happens to My Life Estate Upon My Mother’s Death?

What Does Medicaid Do If We Sell a House in a Life Estate?

Medicaid Estate Recovery and Liens

Is a Life Estate or Irrevocable Trust Better for Protecting my House from Medicaid Estate Recovery?

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