What Is a Life Estate?
A Life Estate involves property ownership. In Michigan, an Enhanced Life Estate Deed, or Lady Bird Deed is also a popular option. Michigan also has a Quit Claim Deed for passing on property and defining property interests. Each of these documents helps heirs avoid Probate Court.
Of course, each situation is unique and contacting an experienced attorney who specializes in estate planning is highly recommended. Sound legal advice helps you decide which one of these documents works best for your family.
What is the Purpose of a Life Estate?
A Life Estate divides property into two main groups. The groups are defined by the “life tenant’s” life span. The two groups are further divided into three subgroups.
- Grantor- The current owner of a property creating the deed
- Life Tenant- The person owning the estate (usually the grantor)
- Remainder Beneficiary- The future owner of the property (after the life tenant passes away)
Generally speaking, #1 and 2 meet with an attorney to establish a Life Estate and #3 are the heirs of the estate. It’s important to note that the Life Tenant lives in the property while alive; heirs may not “take over” the property before the Life Tenant passes away. So, the Remainder Beneficiary’s interest does not begin until after the Life Tenant dies.
Pros and Cons of a Life Estate
Life Estate Deeds have some benefits and certain drawbacks. The main advantage to using this document is to avoid probate at death. Since, the property is not included in probate this also has positive implications regarding “Medicaid Recovery.”
Another positive aspect is the life tenant remains in their home until passing. Yet, there are some negative aspects to this type of deed. One disadvantage is with this deed the Life Tenant cannot mortgage the property without consent from the beneficiaries.
So, when you set up this deed you maintain possession of your property; but, lose some control over the property.
Michigan’s laws on personal property and real estate are rather complex. You can see an example of some of these laws in Michigan’s Real and Personal Property Statutes. As a result, it’s extremely important to consult an experienced estate planning lawyer before setting up this deed.
An Alternative Property Deed Form Allowed in Michigan
Every state has different laws regarding property transfer. In Michigan, a Lady Bird Deed is another type of property deed allowed under state law. A ladybird deed falls under the Michigan Land Title Standards (6th) 9.3 which details this method of property transfer. Simply put, a ladybird deed is a type of quit claim deed that transfers property to heirs upon your death. Similarly, a Lady Bird Deed avoids probate court. However, this type of deed has several other advantages that a Life Estate may not possess:
- A ladybird deed allows you to maintain control of your property while alive
- A ladybird deed may protect your home from Medicaid Recovery
- A ladybird deed has positive tax implications for you and your heirs
Naturally, a Lady Bird Deed or a Life Estate Deed may, or may not work for your family. Each family situation is unique and should be evaluated by an experienced estate planning attorney.
Estate Planning Attorney Sean Nichols
Sean Nichols is an experienced lawyer who specializes in elder law, probate, and estate planning. Sean dedicates his legal practice to helping the elderly and their families plan for their future and navigate the complex laws involved with aging and inheritance.
If you have legal questions about estate planning or probate in Michigan, contact the law firm of Sean J Nichols, PLLC.