What is the Purpose of a Lady Bird Deed in Michigan?
A Lady Bird deed is an estate planning tool allowing you to maintain property ownership until death. Upon your demise, your property automatically transfers to your designated beneficiary without going through probate. The document is also known as an Enhanced Life Estate Deed.
Many often opt for a Lady Bird Deed when making plans for their estates because of its benefits. Kendal Law Group, Bloomfield Hills business and estate planning lawyers say it helps keep property within the family without sacrificing Medicaid eligibility or putting the estate at risk of state recovery to cover Medicaid costs after the owner’s death. A Lady Bird Deed also removes the property from probate, saving time and probate fees and costs.
What Are the Downsides of Using a Lady Bird Deed as an Estate Planning Tool?
One disadvantage of using a Lady Bird deed alone is that it’s not the most flexible solution. The document may need additional work if you wish to leave your assets to multiple beneficiaries. New circumstances may make you change your mind about your initially chosen beneficiary or the transfer.
If such happens, more legal work will be required. While this may sound simple, consulting Kendal Law Group, skilled trusts lawyers in Bloomfield Hills is crucial. They can provide legal counsel on the implications of changing beneficiaries on a Lady Bird Deed.
Estate Taxes and Liens
An estate tax return and clearance may be needed when a life tenant passes on. When you’re likely to leave an unpaid property lien, using a Lady Bird Deed for estate planning alone is generally not a good idea. An estate tax return may be required under the following circumstances:
- If the owner died in 2013, there is an estate tax exemption of $5.25 million and only $60,000 for non-resident aliens.
- A tax may be imposed when there is a change in ownership involving non-citizens, similar to capital gains tax. In some cases, there are tax treaties that can reduce or eliminate the taxes on property.
It’s important to consult experienced Bloomfield Hills trust attorneys for in-depth legal counsel on the implication of a Lady Bird Deed on property taxes. Your heir may have to pay higher property taxes once they inherit the property. Your lawyers can advise on alternative trusts that can help avoid this.
People who receive a gift or real property are not automatically covered under standard title insurance policies, as is the case under a Will or trust. That means your beneficiary will not benefit from the existing title insurance policy under the Lady Bird Deed.
Complexities When There Are Unanticipated Circumstances
Once you name a beneficiary in a Lady Bird deed, it can be difficult to provide alternative distributions if they pass on before you do. A Will or trust can be a better tool in planning for unforeseen circumstances.
Besides, if you change your mind, you should take special care while implementing the changes. Skilled trusts lawyers in Bloomfield Hills can provide in-depth information about everything you need to know when changing your Lady Bird Deed details.
A creditor’s lien can attach to a remaining interest, creating complexities on the title. That means that the lien is payable if you sell the property. Without probate, creditors can put a claim on the assets, which may not be cleared until at least two years after the date of death.
Additionally, banks and title companies may not understand the non-vested nature of the remainder interest. Consequently, they may require the beneficiary to join in a conveyance or a mortgage.
What Factors Should I Consider When Using a Lady Bird Deed?
Consider several crucial factors before using a Lady Bird deed to plan your estate. Skilled business and estate planning attorneys in Bloomfield Hills can help you evaluate your circumstances to determine the most suitable property transfer method best for you. Crucial factors to consider are:
- The number of beneficiaries
- Tax implications
- Level of control on your assets
- Legal implications
- Potential Medicaid eligibility issues for long-term care
Are There Alternatives to a Lady Bird Deed?
If you determine that a Lady Bird Deed alone is not an appropriate estate planning tool in your case, your business and estate planning attorneys in Bloomfield Hills can help you choose among other estate planning tools. These include the following:
- Revocable living trusts: They allow you to retain control of your assets during your lifetime but can be a little more complex to create.
- Life Estate Deeds: They help your beneficiaries avoid probate, but your heirs must approve any changes you wish to make to the document.
- Transfer-on-death or beneficiary deeds: They work similarly to Lady Bird Deeds, but an attorney can provide in-depth legal counsel
- Wills: You can use them for property transfer, but they may be subject to probate upon your demise.
An Experienced Trusts Lawyer Helping Providing Legal Counsel on Estate Planning Tools
Business and estate planning is complex, and you can use various legal tools to accomplish the task. One is the Lady Bird Deed, but it has some disadvantages. Before using it to express your property transfer wishes, it’s best to consult reputable estate planning attorneys in Bloomfield Hills to evaluate various factors and make sure it is the right choice for you.
Trust lawyers at the Kendal Law Group PC are skilled and have a wealth of knowledge in estate planning. We can provide legal assistance every step of the way to help you set up your trust to ensure you do everything correctly. Call us at 248-609-1718 to schedule a FREE consultation.