Michigan Ladybird Deed
A Ladybird Deed can be one of the most important estate planning tools for any homeowner in Michigan. For this blog, let’s begin with a fun fact, instead of jumping right into definitions. The term “Ladybird” came when President Lyndon B. Johnson used this type of deed to transferred his house to his wife Lady Bird Johnson.
Now for definitions – a Ladybird Deed is a type of warranty or quit claim deed that gives the owner the ability to transfer the title, automatically, to someone (a beneficiary) in the event of their passing, outside of probate court. It also allows the owner to retain control of the property during their life, and this includes the right to change the beneficiary or sell the property, among other things. As of now, only 5 states currently recognize Ladybird Deeds – Michigan being one of them. Generally a Ladybird deed will be prepared with an Estate Planning Attorney, it is then signed and recorded with the local register of deeds. It’s a fairly simple process, but a very effective tool.
So, with a Ladybird Deed, we avoid probate court, which can be costly and time consuming. Another benefit is that we are also allowed to stay in control of the property until we pass. What other benefits are there to a Ladybird Deed?
A transfer by Ladybird Deed is not part of the probate estate, therefore, it cannot be taken by the state to repay the cost of Medicaid nor can it be considered in the 5 year look back, because the property is still yours until your passing – you haven’t transferred or gifted this asset while alive. I do still highly recommend consulting a Medicare planner about this.
Property taxes will not increase for the beneficiary since the property is directly passed. And since the property doesn’t become theirs until your passing, they also will not be subject to gift tax. It is also a cost effective estate planning tool if your only major asset is the home you own. A Ladybird deed is considerably less expensive than a Living Trust.
Possible drawbacks of a Ladybird Deed… if you’d like to leave the property to more than one beneficiary, it’s not exactly the most flexible or easiest solution. If you have more assets that just your home, it may not be enough to avoid probate court. If you want to control WHEN your beneficiaries receive the property – perhaps to protect them from creditors, bankruptcy, divorce or possibly you want the beneficiaries to still be able to receive needs-based government benefits – such as Medicaid. With any of these situations, a Living Trust might be better for you.
As with any planning of your assets, it is best to consult an Estate Planning Attorney. They can help you decide which method is right for you and guide you through the process. Please feel free to reach out if you have any questions. You can contact the Estate Planning experts at My Estate Plan Michigan at 248-744-4434 or email us at firstname.lastname@example.org.