Probate is the process of validating a person’s estate plan – if they have left one behind – and distributing their assets upon their death. When people name assets in a will and leave them to different heirs and beneficiaries, it is through probate that these assets are actually transferred over to the next generation.
The probate process can be time-consuming and sometimes expensive, so people will often want to avoid it entirely – or at least keep certain assets free from its scrutiny. An example of one way to achieve this goal is by using a payable-on-death account, which sets up a beneficiary in advance and automatically transfers a financial account into someone else’s name upon the original owner’s death. It doesn’t have to go through probate because it immediately becomes their property.
With real estate, one way to do this in Michigan involves using a ladybird deed. These have been traced back to President Lyndon B. Johnson, and they are legal tools that can be used to transfer ownership of real estate quickly upon someone’s passing. Affected real estate does not have to go through probate.
What advantages does it provide?
One advantage is that you can use a ladybird deed while you’re still alive without giving up complete control of your property. You can get a mortgage on that property if you need to, and you can even sell it. If you still own the property when you pass away, then the named beneficiary takes possession. But if you sold that property or it has changed hands for some reason, then the deed simply no longer applies.
There can also be some potential tax savings associated with utilizing a ladybird deed as well. Properties are assessed at current values when someone passes away and the next generation takes over. Capital gains taxes are often detrimental to heirs, who suddenly have to pay for property that they are inheriting, but a ladybird deed can help to prevent this obligation.
As you can see, there are many different estate planning tools to consider, depending on your specific situation. Be sure you know about all the legal options at your disposal by seeking legal guidance as you craft your approach.
