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What is a Michigan Lady Bird Deed?


By gmatecun - Posted on March 27, 2012

"What is a Lady Bird Deed?"  I have been hearing this question more and more lately, likely because this type of deed with a curious name has become a much more popular estate planning strategy in Michigan.

A Lady Bird Deed is a special type of deed.   To see how it works, let's take your home as an example.  You own your home (whether you have a mortgage or not).  When you sign a Lady Bird Deed, you convey your home to yourself, but you reserve the power to sell, mortgage, gift (or otherwise transfer) your home during your lifetime.  If you don't convey your home during your lifetime, the Lady Bird Deed identifies who receives your home after you die.  This can be one or more individuals, or it can be a trust.

What are the benefits of a Lady Bird Deed in Michigan?  Here are the main ones:

1.  Lady Bird Deeds avoid probate.  The property goes directly where you want it to go, without getting the Michigan probate court involved.

2.  Lady Bird Deeds are Medicaid friendly.  If your home is in a trust, it is "countable" for Medicaid purposes.  A Lady Bird Deed avoids this problem, and is not considered a "divestment" for Medicaid purposes.

3.  Lady Bird Deeds are tax friendly.  Since there is no "gift" during your lifetime (the transfer only occurs at death), the person receiving the property gets what is known as a "step up in basis".  In short, there should be no income tax on the sale of your property after you die.

4.  At this time, a Lady Bird Deed Avoids Michigan Estate Recovery.  After you die, Michigan's recent estate recovery law allows the government to take your home under certain circumstances if you received Medicaid benefits during your lifetime.  A Lady Bird Deed is a great way to avoid estate recovery.

5.  You don't give up any control.  You can still do whatever you want with your property during your lifetime.  And you can change it or take it back at any time.

A Lady Bird Deed can be a great estate planning strategy when combined with your other estate planning (for example, Trust, Will, Durable Power of Attorney, Health Care Power, etc.).

To see whether the use of a Lady Bird Deed makes sense with your estate plan (it almost always does), take advantage of our complimentary consultation, click on the "Free Case Analysis" up top, or take our 15-Point Estate Planning Audit (to the right).

 An interesting side note:  The story is that the "Lady Bird Deed" acquired its name when President Johnson used this type of deed to convey property to his wife.

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Glenn Matecun is a Michigan elder law, elder care, probate and estate planning attorney, working with clients in Livingston County (including Howell, Brighton, Hartland, Fowlerville and surrounding areas), Macomb County (including Clinton Township, Shelby Towhship, Mt. Clemens and surrounding areas), and Wayne County. Learn more at www.MichiganEstatePlans.com

 

 

This information is designed to provide a general overview with regard to the subject matter covered. Glenn Matecun is licensed by the State of Michigan and this website is for Michigan residents only. The authors, publisher and host are not providing legal, accounting, or specific advice to your situation. IRS Circular 230 Disclosure: Any federal tax advice contained in this communication, including attachments and enclosures, is not intended or written to be used, and may not be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.