A ladybird deed is a straightforward and inexpensive way to transfer real property at death. With a ladybird deed, one may retain complete control of the property during one’s lifetime but at one’s death, the property is transferred directly to those named on the deed. This is similar to the way an investment account or bank account may list a “beneficiary.”
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 ladybird deed, you retain the ability to mortgage, gift (or otherwise transfer) or sell your home during the course of your lifetime. Even if you don’t convey your home over the course of your life, the ladybird deed can identify on your behalf who should receive your home after you pass away, and the ownership automatically transfers to whoever is named. Ownership can be transferred to one or more individuals as well as to a trust.
Benefits Of A Ladybird Deed
At Creighton McLean & Shea PLC, we can help you benefit from a ladybird deed transfer. And just what are the benefits of a ladybird deed in Michigan? Here are the main ones:
- Ladybird deeds avoid probate. The property goes directly where you want it to go, without getting the Michigan probate court involved. This can save a family thousands of dollars.
- Ladybird deeds are Medicaid friendly. If your home is in a trust, it is “countable” for Medicaid purposes, so you might be disqualified from Medicaid just because your trust owns the house. A ladybird deed avoids this problem: when the house is in your own name, it is not a “countable asset” for Medicaid purposes. This can save a family a great deal of money when a loved one requires a nursing home care.
- Ladybird 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.
- At this time, a ladybird 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 ladybird deed is a great way to avoid estate recovery under current law.
- 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.