There are many different types of estate planning devices available to Michigan residents that can help them accomplish their goals.
Depending on their individual situations, those in and around Livonia may want to use one or more of these devices to help them protect their property and pass down to their loved ones.
To get legal advice and formulate a specific strategy, it is important to speak with an attorney who has experience with estate planning.
A ladybird deed, which may also be known by other names, is one estate planning device an attorney might recommend. Michigan is a state which allows its residents to use ladybird deeds.
How ladybird deeds work
The ladybird deed is particularly helpful to those trying to make sure that they will qualify for Medicaid by the time they need the support of full-time nursing care.
Basically, a ladybird deed will reserve a life estate with a homeowner who is trying to engage in some estate planning. As the name implies, a life estate gives the homeowner the right to live in the house for the rest of their natural life.
In short, it’s basically a right to stay on property indefinitely and without paying rent.
However, unlike more traditional life estate deeds, the ladybird deed clearly states that the person next in line to get the home, the beneficiary, only has an interest in the property when the current homeowner dies.
Until that time, the current homeowner can do what they wish with the property, including selling it or taking out a mortgage. With traditional life estates, the homeowner would have to get their successor’s permission to take such steps.
Benefits of ladybird deeds
The biggest benefit of a ladybird deed is that it allows a person to keep control of his or her real estate while still planning for the future. It also allows the person to pass his or her home to a loved one outside of the probate process.
When it comes to Medicaid planning, a person, or couple, who uses a ladybird deed can continue to take full advantage of the exemption allowed for one’s personal residence. This exemption means that someone applying for Medicaid does not have to count his or her home as an asset and thus has a better chance of meeting Medicaid’s income and asset thresholds.
On the other hand, the ladybird deed also does not count as a transfer subject to Medicaid’s lookback period, which means a couple won’t have to sit out from Medicaid benefits on a penalty period for making gifts.
Finally, at least as Michigan law currently stands, state officials cannot make claims on homes transferred through ladybird deeds in order to satisfy Medicaid debts.
Ladybird deeds have tax and other benefits as well, and they are often more budget-friendly than, say, creating a trust.