Lady Bird Deeds in Michigan: A Powerful Estate Planning Tool
Among the various estate planning tools available you, one lesser-known but highly effective options in Michigan is the Enhanced Life Estate or Lady Bird Deed. This type of deed provides a unique way to transfer property while retaining control during your lifetime. In this blog post, the estate planning attorneys at Thompson Legal will delve into the concept of Lady Bird Deeds, their advantages, and how they can benefit you in your estate planning efforts.
Note that this post on Lady Bird Deeds is not exhaustive, and every situation is unique. The transfer of real estate may have unintended tax or benefit program consequences, so it is always advisable to speak with an attorney before execution. Contact Thompson Legal to schedule a discovery call with an estate planning attorney.
What Is a Lady Bird Deed?
A Lady Bird Deed, also known as an Enhanced Life Estate Deed, is a legal instrument used in estate planning that allows property owners to transfer real estate to their chosen beneficiaries while retaining certain rights and control over the property during their lifetime. This type of deed is especially popular in Michigan due to its flexibility and benefits.
Key Features of a Lady Bird Deed:
Retained Control: With a Lady Bird Deed, the grantor (property owner) retains full control of the property during their lifetime. They can sell, mortgage, or change beneficiaries without needing the consent of the remainder beneficiaries. Meanwhile, the future beneficiaries may not partition, sell, or otherwise encumber the property.
Avoiding Probate: One of the primary benefits of a Lady Bird Deed is its ability to bypass probate. Upon the grantor's passing, the property automatically transfers to the remainder beneficiaries without the need for probate court involvement, which can save time and money.
Medicaid Planning: Lady Bird Deeds can be valuable in Medicaid planning. Estate recovery may be avoided, there is no divestment or loss of exemption for Medicaid purposes. Note however, that the property is still a countable asset for Medicaid purposes unless it’s exempt (i.e., a homestead).
Property Tax Benefits: In Michigan, the transfer of property through a Lady Bird Deed does not trigger a reset of the property's taxable value. This can lead to potential property tax savings for the remainder beneficiaries. The property will also not lose the step up in basis under IRC 1014 and 2036(a).
Flexibility: Lady Bird Deeds can be amended or revoked by the grantor at any time during their lifetime, offering flexibility to adapt to changing circumstances or estate planning goals.
Liability protection: One notible benefit of a lady bird deed for amrried couple is that the couple retains the protection of tenancy by the entireites. Additionally, liability insurance on the property will not need to be updated as ownership has not changed.
One disadvantage of a Lady Bird Deed is that the property is an asset for federal estate and generation-skipping taxes (i.e., not a completed gift). Therefore, you should speak with a tax professional about any gifting issues you think may arise.
Who Benefits from a Lady Bird Deed?
Lady Bird Deeds can be particularly advantageous for individuals and families with specific estate planning objectives, including:
Those who wish to avoid the time and costs associated with probate.
Property owners concerned about Medicaid eligibility.
Individuals who want to ensure that their home or property passes directly to chosen beneficiaries.
Those who want to maintain control over their property during their lifetime while having a clear plan for its transfer upon their passing.
Conclusion:
Michigan's Lady Bird Deed, or Enhanced Life Estate Deed, is a powerful estate planning tool that offers flexibility, control, and the ability to bypass probate. It can be a valuable addition to your estate planning strategy, but it's essential to consult with an experienced estate planning attorney to ensure it aligns with your specific goals and circumstances. Contact Thompson Legal to discuss learn more about the benefits of a Lady Bird Deeds.
This blog is for informational purposes only. It is not intended as legal advice. In the event you would like to speak with an estate planning attorney about your case Contact Us at (734) 743-1646 to schedule a consultation.
