IS A LADYBIRD DEED RIGHT FOR YOU?

by Van Den Heuvel Law Office

Michigan is one of only five states that allows the use of Ladybird deeds. If you’ve heard of them, you might be wondering how they differ from a trust or a will. And if you’re considering using one, you might think that it can replace the need for an estate plan. But while Ladybird deeds are a good option for some families or situations, there’s a lot of important issues they can’t cover.

How Does a Ladybird Deed Work?

In short, a ladybird deed is a legal method for transferring real property such as a home or land. Also known as an Enhanced Life Estate Deed, it gives the property owner, or a person they designate, the right to live in or on that property throughout their lifetime. When the property owner passes on, the property is automatically transferred to beneficiaries they selected. 

Advantages of a Ladybird Deed

One appealing feature of ladybird deeds is that they allow the property owner and their spouse to retain control over the property during their lifetime. This includes the ability to refinance or sell the property, and the ability to alter or terminate the ladybird deed if they choose. 

Property transferred through a ladybird deed is not required to go through the probate process, which can save time and reduce expenses. It can also create significant tax advantages for beneficiaries by allowing them to avoid gift tax on the home or property. For the property owner, having a ladybird deed in place may assist in establishing eligibility for Medicaid long-term care, which has strict limits on assets. It may also be used to protect the property from Michigan’s Estate Recovery Law, which allows the state to seek reimbursement from a deceased person’s estate for Medicaid benefits received during their lifetime.

Why a Ladybird Deed Can’t Replace an Estate Plan

While there are clearly some good reasons why Michigan property owners would consider a ladybird deed, it’s important to realize that it can’t replace or eliminate the need for a complete estate plan.

A ladybird or Enhanced Life Estate Deed can only convey real property, and does not include any of the possessions, furniture, cars, etc. on the property. It also won’t address any loans owed on the property, which will be passed on to the beneficiary. If more than one beneficiary is named, the parties will be considered “joint tenants” and will have to agree to sell the property or take out loans against it.

Finally, a ladybird deed cannot protect your interests if you become seriously ill. For example, if a property owner is no longer able to manage their own care and a guardian is required, that guardian can choose to sell the property to help cover medical bills. And if you anticipate the need for Medicaid, you’ll need to take very specific and careful estate planning actions to transfer your property and maintain eligibility.

Protect Your Family’s Future with a Complete Estate Plan

The ability to establish a ladybird deed is an advantage for Michigan families, but it’s just one of many estate planning tools and tactics that can help protect your property, and there are often better options available. At Van Den Heuvel Law Office, we’ve spent decades helping Michigan families pass on their treasured homes and assets with confidence, and we’d love to help you, too. To learn more about our estate planning and family law services, please contact our office today by phone or through our online form to request a consultation.

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