What is a Lady Bird Deed?
You can use several tools to plan your estate, and a Lady Bird Deed is one of them. It allows you to transfer your property to a named beneficiary upon your death while saving them from the expensive and lengthy probate process for that property. Bloomfield Hills business and estate planning lawyers also refer to it as an enhanced life estate deed.
One outstanding factor of a Lady Bird Deed is that it allows you to retain lifetime ownership interest and control of your property. You maintain the freedom to sell or borrow against your assets during your lifetime. Upon your death, the listed assets automatically pass to your appointed beneficiaries. Kendal Law Group can help you draft the document to suit your needs.
How Does a Michigan Lady Bird Deed Work?
A Lady Bird Deed is easy to use, and creating one is simple and inexpensive. As the creator of the Deed, you only need to sign a deed that gives your property to your designated heirs. However, you are the life tenant as far as the Michigan Lady Bird Deeds is concerned, and you retain the rights to do with your property as you wish during your lifetime.
You also maintain the authority to dispose of it. All your interests in the property at your death will pass directly to the named beneficiaries. Kendal Law Group, Trusts lawyers in Bloomfield Hills can provide more insights to help you evaluate if the tool works for you depending on your estate planning goals and needs.
What is the Difference Between a Lady Bird Deed and a Revocable Trust?
The primary purpose of estate planning tools is to reduce taxes, avoid probate, and protect your family and future. The difference between revocable trusts and a Lady Bird Deed depends on your specific estate planning needs. Often, a Lady Bird Deed, is used with a revocable trust or other planning tool to protect your estate and avoid probate.
What are the Benefits of a Lady Bird Deed?
Compared to different types of estate planning and transfer documents, a Lady Bird Deed has several benefits as follows:
Provides a Flexible Option for Controlling Your Property
Retaining control of your property is one of the most significant benefits you can achieve with Lady Bird Deeds. Being able to do whatever you want with your property while you’re still alive is an advantage you want to take advantage of.
The Deed also offers some protection from creditors to your beneficiaries. Your beneficiaries’ creditors won’t be able to attach to the property while you’re still alive. That’s because you’re still the owner of the assets until your death.
You can change the beneficiary if the appointed one develops creditor problems or is sued. Talk to skilled Bloomfield Hills trust attorneys for more legal counsel on how this works.
Positive Tax Implications
A Lady Bird Deed provides some tax protection for the beneficiaries, saving them a good amount in capital gains tax. Other tax advantages of a Lady Bird Deed are:
- No rescission of the principal residence exemption
- No gift tax owed under the Internal Revenue Code
- No state transfer tax
- No county transfer tax
- Protection from loss of the capital gain exclusion under IRC 121
- Protection from the loss of step-up in basis under IRC 1014 and 2036(a)
Avoiding Probate with a Lady Bird Deed
A Lady Bird Deed, properly created, is one of the most effective estate planning tools to help beneficiaries avoid probate. Probate is a supervised court process that transfers the titles of your assets to your heirs. It is time-consuming, costly, and cumbersome, and this Deed can help your loved ones avoid the headaches associated with the process.
Protection from Medicaid Recovery
The Michigan Lady Bird Deed doesn’t hurt your ability to receive benefits for Medicaid in a nursing home and provides you with several benefits. If your home goes through expensive probate court process, it could be subjected to a Medicaid Recovery, allowing the State of Michigan to submit a claim on the Medicaid holder’s estate. These funds go towards the costs incurred by the State.
Having experienced trust lawyers in Bloomfield Hills when creating a Lady Bird Deed is crucial. They can help you sort through the issues that make sense for general estate planning but may be unsuitable when trying to protect your assets during your life without losing Medicaid benefits.
Are There Downsides to a Lady Bird Deed?
One of the most significant downsides to a Lady Bird Deed is that the death of the appointed beneficiary could complicate the process. Providing for an alternative beneficiary is difficult if the default beneficiary predeceases the life tenant.
Besides, there may be more appropriate estate planning instruments than a Lady Bird Deed if a significant amount of property is involved. It may complicate inheritance issues with one or more of the heirs involved. A Lady Bird Deed alone often does not cover all of your needs. Instead, it is often used as one part of a comprehensive estate plan designed to properly protect you and your needs
What is the Cost for a Lady Bird Deed?
One of the significant benefits of a Lady Bird Deed is the low cost it attracts in creating it and helping your beneficiaries avoid probate court.
Counties charge a recording fee, typically $30, in Michigan. You will also incur legal fees. While the cost varies, it’s typically less than $500. That accounts for the attorney’s time drafting the document, evaluating its contents, and ensuring it’s enforceable after your death.
Legal Counsel from a Skilled Bloomfield Hills Estate Planning Attorney
The Michigan Lady Bird deed is a small but ideal estate planning tool to help your beneficiaries avoid probate upon your demise. It’s a few pages long and can be ideal for specific estate planning situations. Consult experienced business and estate planning lawyers in Bloomfield Hills to evaluate if it works best for you and determine which other tools you need.