The Transfer on Death Deed is one of the newest estate planning tools in Texas. It allows owners of real estate to transfer property to their heirs by deed, outside the probate process.
The owner names a primary and contingent beneficiary, who will automatically inherit the property after the owner passes away, just like the beneficiary designation on a life insurance policy or a bank account.
Not only is this a great way for someone to avoid probate (if their only probate asset is their home), it's also a great way for people to avoid violating Medicaid rules by having too many assets.
This is possible because the real estate property is no longer considered to be an asset after being placed in the deed.
Staying within the Medicaid asset rules
Medicaid is a "needs-based" program, and in order to qualify, a person must show that he or she does not have enough funds to pay for his or her own care by not exceeding a specific asset limit.
There are many assets that do not count toward the limit, including a home, a car, personal belongings, and household goods and furnishings. However, real estate property that is not the person's home or essential to self support can be counted toward the asset limit and cause an individual not to qualify.
That is, unless the Transfer on Death Deed is used.
Bypassing the Medicaid Estate Recovery Program
Additionally, the deed allows the property to bypass the Medicaid Estate Recovery Program. When a person receives Medicaid services, the Medicaid Estate Recovery Program allows the state to ask for money back from that person's estate after he or she dies.
Because the asset is not considered to be part of the person's estate, it is not subject to estate recovery.
Help from an experienced estate planning attorney
The Transfer on Death Deed can be an excellent estate planning tool for individuals who own real estate property but do not want that property -- or earnings from selling that property -- to disqualify them from Medicaid eligibility.
The deed also allows the property to bypass probate by being automatically transferred to the named beneficiary upon death, which is ideal for many families.
For more information on this type of deed, which is relatively new under Texas law, meet with an estate planning lawyer who can advise you on whether or not it makes sense in your family's situation.