Lady Bird Deeds

A “Lady Bird Deed,” also known as an Enhanced Life Estate Deed, can be very useful if you have a home or other real property you want to include in your estate plan. This deed can keep you or your senior relative in their home without worrying that the transfer of property will create tax consequences or capital gains for your family after their death.

However, Lady Bird deeds also have their limitations, especially when there are children involved in your estate. Before you sign an Enhanced Life Estate deed form, be sure to speak to a Michigan estate planning and probate attorney about your assets, your needs, and your plans for the future. No deed can replace a comprehensive estate plan. It should be used together with a will, trust, or other estate planning documents to ensure your wishes are carried out.

If you or your family need help incorporating a Lady Bird deed into your Michigan estate plan, we are here to help. Call (734) 994-3000 or fill out our online contact form today.

What is a Lady Bird Deed?

Michigan is one of about 16 states to allow property transfers under a “Lady Bird Deed.” This is a real estate document that transfers a person’s ownership at the time of their death, while retaining that person’s right to use and even sell the property during their lifetime. Other states have similar processes for real estate under different names, such as transfer-on-death (TOD) or beneficiary deeds. However, these may work differently or not include all the benefits of a Michigan Lady Bird deed.

How Does a Lady Bird Deed Work?

An owner of a house, land, or other real property can sign a Lady Bird deed at any point in their lifetime. That deed names beneficiaries who will receive the property if the owner still owns the property upon death. Up until that point, the owner retains possession – the right to live in the home or use the land – and control over the property. This includes the right to mortgage the property, make improvements on it, or even sell it. The owner can also amend a Lady Bird deed after it has been created if, for example, they need to protect the property from a beneficiary’s creditors. Once the owner passes away, the “tax basis” of the property will “step up” to it’s value at death. This keeps the beneficiaries from facing substantial capital gains taxes based on the appreciation of the property during your lifetime.

Does a Lady Bird Deed Avoid Michigan Probate Court?

One advantage to using a Lady Bird Deed is that it removes your home or real property from your probate estate. The property described in this type of deed automatically passes to your intended beneficiary on death, without the Michigan Probate Court overseeing the transfer. When used in conjunction with other estate planning tools, this can help you avoid probate and resolve your loved one’s estate in a quick and cost-effective way.

Can a Lady Bird Deed Replace a Trust?

If your only major asset is your home, a Lady Bird deed may be a simpler, less expensive option than a living trust. Both can help your loved ones avoid probate, but a trust generally requires you to transfer assets, retitle property, and maintain separate accounts for your trust assets. Your trustee may also need to provide regular accounting to your intended beneficiaries. This type of deed only needs to be signed once and remains effective until death.

How Can You Use a Lady Bird Deed in Elder Law Planning?

A Lady Bird deed can also help protect elders’ assets and their ability to qualify for government assistance. Enhanced Life Estate deeds have been approved by the Michigan Department of Health & Human Services. Because the owner retains an unrestricted interest in the property, the transfer does not count as a divestment for Medicaid purposes. That means your loved one may be able to use a Lady Bird deed to meet the strict Medicaid eligibility requirements.

Should an Enhanced Life Estate deed Be Part of Your Michigan Estate Plan?

There is no one answer to whether you should or shouldn’t use a Lady Bird deed as part of your Michigan estate plan. Each family’s assets, intentions, and financial situation are different. That is why it is important to Consult with one of our estate planning attorneys to discuss whether a Lady Bird deed is the right tool for your estate plan.