# The Lady Bird deed trick that saves your house

> One deed clause lets you transfer your home to your child while keeping full control, dodging Medicaid penalties and erasing decades of capital gains taxes.
- Title: The Lady Bird deed trick that saves your house · 24/7 Wall St.
- Summary: One deed clause lets you transfer your home to your child while keeping full control, dodging Medicaid penalties and erasing decades of capital gains taxes…
- Keywords: lady bird deed, estate planning, medicaid planning, capital gains tax, probate avoidance, property transfer, medicaid look-back, stepped-up basis, florida, michigan, texas, vermont
- Source: 24/7 Wall St. — https://247wallst.com/personal-finance/2026/09/19/they-signed-the-house-over-to-their-daughter-but-kept-the-right-to-sell-it-or-take-it-back-that-one-clause-kept-the-nursing-home-bill-off-the-house-and-handed-her-a-clean-basis-too
- Author: David Beren
- Published: 2026-09-19T18:33:36+00:00
- Read time: 2 min
- Topics: lady bird deed, estate planning, medicaid planning, capital gains tax, probate avoidance, property transfer, medicaid look-back, stepped-up basis, florida, michigan, texas, vermont
## What a Lady Bird deed does
You transfer your home to your child today but keep the power to sell, mortgage, or revoke the deed without their consent. Title passes to them automatically at your death, outside probate.

> She has no present interest and cannot block a sale or force a refinance.
## Only a handful of states recognize it
Lady Bird deeds work in Florida, Michigan, Texas, Vermont, and West Virginia, with a few other states treating similar instruments through statute or title practice. Always confirm with a lawyer licensed in your state.

> This tool is recognized in only a handful of states, commonly Florida, Michigan, Texas, Vermont, and West Virginia.
## No gift tax triggered
Because you kept the power to revoke and sell, no completed transfer occurs for federal gift tax purposes. No Form 709 is required and your lifetime exemption stays intact, unlike an outright deed.

> No Form 709 is required, and your lifetime exemption is not consumed.
## Medicaid can't penalize the transfer
Medicaid's transfer penalty applies to gifts within the 60-month look-back period. Since you can still revoke, sell, or mortgage the property, no gift has occurred and Medicaid treats it as a non-transfer for eligibility purposes.

> Since you can still revoke, sell, or mortgage the property, no gift has occurred.
## The house may escape estate recovery
Federal law requires states to recover Medicaid long-term care costs from a deceased recipient's estate. In states limiting recovery to probate assets, a house passing outside probate is beyond reach.

> In states limiting recovery to probate, a house passing outside probate is beyond reach.
## Your child gets a clean tax basis
The house is included in your gross estate, triggering a basis adjustment to fair market value at death. Your daughter's cost basis resets to the house's value when you die, erasing decades of capital gains.

> Property included in a decedent's estate receives a basis adjustment to fair market value at death.
## Important limits to know
The deed only works in a handful of states, estate recovery rules vary, and some states reach past probate. Lenders may raise questions, refinancing can be awkward, and if your daughter dies first, you may need to revisit the deed.

> A defective deed can fail entirely. If your daughter predeceases you, you may need to revisit the deed.
## Key takeaway

A Lady Bird deed can shield your home from Medicaid recovery, eliminate capital gains tax through a stepped-up basis, and skip probate entirely, but only works in a handful of states.