Michigan Lady Bird Deeds Explained

Michigan Lady Bird Deeds: Low-Cost Probate Avoidance

An enhanced-life-estate deed, commonly called a Lady Bird Deed, is a popular tool in Michigan for passing real estate to heirs while avoiding probate. This deed allows the property owner to retain full control during their lifetime—including the right to sell, mortgage, or change beneficiaries—while ensuring the property transfers automatically to named beneficiaries upon death.

• Probate avoidance: Property passes directly to beneficiaries without the need for probate court, saving time and costs for families.

• Retained control: The owner keeps all rights to use, sell, or refinance the property during their lifetime. The transfer to beneficiaries only occurs upon the owner's death.

• No uncapping of property taxes: Under Michigan law (MCL 211.27a), a transfer by Lady Bird Deed does not trigger the "uncapping" of taxable value, so property taxes remain based on the current capped value. This can result in significant tax savings for heirs.

• Medicaid planning: Because the owner retains control, a Lady Bird Deed may be used in Medicaid planning. However, Medicaid rules are complex, and eligibility can depend on many factors. If Medicaid benefits are a concern, review the latest state rules and consider all available options.

• Simple and cost-effective: Lady Bird Deeds are generally less expensive to prepare than trusts and do not require ongoing administration. However, they may not be suitable for all situations, especially if there are multiple heirs with potential for conflict, or if the property is subject to a mortgage or other liens.

Caveat: While Lady Bird Deeds are a powerful tool for many Michigan families, they are not a one-size-fits-all solution. Issues can arise if beneficiaries predecease the owner, if there are multiple properties, or if the property is located outside Michigan. Always review your full estate plan to ensure all assets and family needs are addressed.

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Disclaimer: This blog post provides general information for educational purposes only. It is not legal advice. Estate planning outcomes can vary based on your personal circumstances and the evidence available.