A Michigan ladybird deed is a type of Quit Claim Deed commonly used in Michigan. This estate planning instrument allows a property owner to maintain control over their property while alive and transfer it to heirs upon their death.
A ladybird deed falls under the Michigan Land Title Standards (6th) 9.3 which governs this method of property transfer. An experienced estate planning attorney can advise you if this type of deed is appropriate for your needs.
Advantages of Lady Bird Deeds
Numerous reasons exist to include a ladybird deed as part of your estate plan. Some of these reasons are listed below:
- Control of Property
A Lady Bird Deed allows you to maintain control of your property while alive. This is extremely important for your protection. For example, some folks think adding their adult children to their property deeds is a good idea. They believe this is one way for the kids to inherit property when parents pass away.Unfortunately, this method is a potential financial disaster. Let’s imagine one of the heirs gets in financial difficulties with creditors or is going through a messy divorce. In these situations, your property may be at risk. Creditors, ex- spouses, or others may lay claim to your estate.
Another important factor to consider is your ability to sell your property, or refinance it at any time. A ladybird deed gives you full control over your property while alive. Since, we can never predict the future behavior of others, it’s important to protect your assets. (See article here for more information on Michigan Divorce Laws.)
- Avoiding Probate
Lady Bird Deeds avoid probate court. These courts deal with someone’s assets and belongings after they pass away. Going through this court is expensive and time consuming. Many times families are dealing with the grief of losing a loved one and find out there was no will, trust, or other estate planning documents.This makes settling an estate extremely stressful and expensive for heirs. So, a ladybird deed would avoid probate court and is a less expensive method of passing on property.
- Protection From Medicaid Recovery
A Lady Bird Deed may protect your home from Medicaid Recovery in Michigan.On September 30, 2007 the State of Michigan passed the Estate Recovery Law. Under this new law the State of Michigan can recoup monies spent on Medicaid from the sale of someone’s home after death. So, if a person qualifies for Medicaid and receives benefits the State will try to recover those benefits after the person passes from the sale of their home. Previous to 2007, a person’s home was passed to heirs…not the State of Michigan.
However, BEFORE applying for Medicaid a person may work with an attorney and set up a ladybird deed to protect their home from the State of Michigan.
- Positive Tax Implications
A ladybird deed provides numerous tax benefits to grantor and heirs. This deed may reduce capital gains tax on the sale of your home. Also, the grantor’s gift tax exemption is unaffected until after death. Finally, you can avoid uncapping your taxes with this instrument. An experienced estate planning attorney can advise you about the tax benefits regarding a ladybird deed.
Disadvantages
Each estate is unique and requires evaluation. There may be times when a ladybird deed is inadequate for a particular family. For example, there may be significant property involved or complicated problems with one or more heirs.
When there are extenuating circumstances within a family an attorney may recommend a trust. If someone in your family has substance abuse problems, mental health issues, physical limitations, or unhealthy personal relationships talk to your attorney regarding the best options. Finally, if a family member is on Medicaid, an inheritance may affect benefits.
All of these factors should be discussed with an experienced attorney that specializes in estate planning. The goal is to protect your assets and provide for your heirs as efficiently as possible.
Lady Bird Deed Michigan Form
The Michigan Lady Bird Deed is a small estate planning document, typically only a few pages or less in length. You can see an example of this document below.
About The Author
Sean Nichols is an attorney who specializes in estate planning. He started his legal practice back in 2011 to help the underserved population of elderly and disabled individuals.
The law firm of Sean J Nichols, PLLC is dedicated to helping families across Michigan plan a comfortable future for themselves and loved ones. We have years of experience representing clients through various estate planning matters including lady bird deeds.
If you have questions about lady bird deeds, wills, trusts, or other similar legal aspects, call and talk to an experienced estate planning attorney today.