MY PARENTS ONLY LEFT ME ONE THING: At the beginning of the game place adjacent an Old Lace Bystander. When Old Lace would take damage, you may instead deal Gertrude Yorkes and Old Lace 1 unavoidable damage.

I had a situation last night where an opposing figure used steal energy on my Old Lace bystander. If Use the trait to avoid the damage dealt to Old Lace, would the steal energy still heal?

The damage from the attack is never taken, it is replaced with the traits effect. Steal Energy can only trigger when the attack causes damage to be taken. So no, the attacker cannot heal.

Thank you. That is the way we ruled it as well but seemed like it could
Go both ways.