If you own a home in Michigan, you may have options to pass it to your heirs without going through probate. A lady bird deed is one tool that could help you do that while keeping full control of your property.
A lady bird deed in practice
A lady bird deed lets you transfer your home to a named beneficiary at your death without court involvement. Unlike a traditional life estate, you keep the right to sell, mortgage or lease the property at any time without your beneficiary’s approval.
Michigan law classifies this type of transfer under MCL 700.6101 as a nonprobate transfer. That means the property passes directly to your beneficiary by operation of law. The beneficiary receives nothing until you die or stop owning the property.
Key benefits to consider
A lady bird deed may offer several advantages over other transfer methods. Here are some reasons Michigan homeowners use them:
- Probate avoidance: Your home passes to beneficiaries without going through the court process.
- Retained control: You can sell or refinance without getting your beneficiary’s permission.
- Medicaid planning: The deed is generally not treated as a completed gift, so it may not trigger a lookback penalty.
- Tax benefits: Beneficiaries may receive a step-up in basis, which can reduce capital gains on a later sale.
Each benefit depends on your specific circumstances, so outcomes can vary.
What you should know about limitations
A lady bird deed is not right for every situation. Some title insurance companies and lenders are unfamiliar with this type of deed. Multiple beneficiaries must agree on what to do with the property after your death. Disagreements could lead to legal disputes. Self-drafted deeds also carry a higher risk of errors that may make the transfer invalid.
Talk to an estate planning attorney
A lady bird deed can be a useful part of your estate plan but it works best when it fits your overall goals. Speaking with an attorney can help you understand how this type of deed applies to your property and your family’s situation.