Lady Bird Deed vs Irrevocable Trust Florida

Two Tools, Different Jobs

Both Lady Bird Deeds and irrevocable trusts can protect a parent's home from Florida Medicaid estate recovery. But they operate differently, cost different amounts, and carry different risks. Choosing the wrong one — or using one when you need both — is a mistake that shows up years later when the family least expects it.

How a Lady Bird Deed Works

A Lady Bird Deed (legally called an Enhanced Life Estate Deed) lets a property owner name beneficiaries who will receive the home automatically at death — without probate. The owner retains complete control during their lifetime: they can sell the property, take out a mortgage, rent it, or revoke the deed entirely without the beneficiaries' consent.

Because the owner keeps full control, Florida does not treat the deed as a completed transfer. This means:

• No lookback penalty. Executing a Lady Bird Deed does not trigger Medicaid's five-year lookback rule. It can be signed during a Medicaid crisis — even after the parent is already in a nursing home.
• No estate recovery. Since the property bypasses probate, it's outside the reach of Florida's Medicaid estate recovery program (limited to probate assets under Fla. Stat. § 409.9101).
• Stepped-up basis. Beneficiaries receive the property at its fair market value on the date of death, not the owner's original purchase price. This can eliminate decades of capital gains if the home is sold.

Cost: $500 to $1,500 for an elder law attorney to draft and record the deed.

Limitation: A Lady Bird Deed only protects the home. It does nothing for bank accounts, investment accounts, or other non-real-estate assets.

How an Irrevocable Trust Works

A Medicaid Asset Protection Trust (MAPT) removes assets from the grantor's ownership entirely. The grantor transfers the home, financial accounts, or other assets to the trust, which is managed by an independent trustee. The grantor cannot revoke the trust, access the principal, or direct how the assets are used.

Because the grantor gives up all control, the transferred assets are no longer countable for Medicaid eligibility. But this comes with the five-year lookback rule:

• Lookback penalty applies. Any assets transferred into the trust within 60 months of a Medicaid application trigger a penalty period. For a home worth $300,000, that's a 28-month penalty ($300,000 ÷ $10,645 penalty divisor).
• Estate recovery protection. Assets in the irrevocable trust are not part of the grantor's probate estate and are protected from recovery.
• No stepped-up basis (usually). Depending on the trust's structure, beneficiaries may not receive a stepped-up basis at death. This means potential capital gains tax on appreciation from the original purchase price if the property is sold.

Cost: $2,500 to $5,000 for the trust document, plus asset retitling fees.

Advantage: Protects all asset types — the home, savings, investment accounts, rental properties — not just real estate.

Side-by-Side Comparison

When to Use Each

Use a Lady Bird Deed when:

• The primary goal is protecting the home from estate recovery
• The parent may need Medicaid within the next five years (no time for the lookback to expire)
• The parent's non-home assets are modest enough to spend down to $2,000 through legitimate expenses
• Simplicity and low cost are priorities

Use an irrevocable trust when:

• The parent has significant non-home assets to protect ($100,000+ in savings, investments, or rental properties)
• The parent is healthy enough that care needs are at least five years away
• The family wants comprehensive asset protection beyond just the house
• The parent is comfortable permanently giving up control of those assets

Use both when:

• The parent wants immediate home protection (Lady Bird Deed, effective now) plus long-term protection for financial assets (MAPT, effective after five years)
• This dual approach is common in families where the parent is in their early 70s with good health but wants to start planning

The Decision Most Families Actually Face

In practice, most families contacting us are already in or near a care crisis. A parent has been hospitalized, diagnosed with dementia, or is clearly declining. The five-year lookback makes an irrevocable trust useless in that moment.

For these families, the Lady Bird Deed is the immediate action item. It costs a fraction of a trust, can be executed today, and accomplishes the most urgent goal: keeping the home out of Medicaid estate recovery. The remaining financial assets get spent down through legitimate means — paying off debts, home modifications, prepaid burial plans, medical equipment.

If you're reading this five years before your parent will need care, you have the luxury of considering a MAPT for broader protection. If you're reading this during a hospital stay, the Lady Bird Deed is your tool.

Our Florida Medicaid Long-Term Care & Asset Protection Guide walks through both options in detail, including the homestead preservation chapter that covers Lady Bird Deed requirements and the asset inventory worksheet that helps determine whether an irrevocable trust is worth the additional complexity and cost.

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