Why You Shouldn’t Deed Your Home to Your Revocable Living Trust

As a Michigan estate planning lawyer, I see families and other attorneys do all kinds of weird things with their home.  The family home is one of the assets that are mishandled the most.

For example, many families have paid thousands of dollars for a trust based estate plan, but their family will still have to go through probate because the home was never deeded to the trust.  But should you deed the home directly to your revocable living trust to avoid probate?  Most likely not and if you have, you’ve sacrificed one of the most important protections available, that is asset protection.

Tenancy by the Entities

Michigan has given married couples special protections for their home, so that if one spouse were to get sued, the home remains a protected asset.  However, to maintain the protection, the home needs to be in husband and wife’s name.

If the property was deed directly into the trust, then that destroys the asset protection the State of Michigan has granted married couples for their home.  Many lawyers and people don’t realize the protection they are destroying by deeding directly to a revocable living trust with a married couple.

So, what is the solution?

Michigan Ladybird Deed

The solution may be the Michigan Ladybird Deed.  The Ladybird deed is similar to a beneficiary designation, but for your home.  So, it’s in your name while you are alive, then when you pass away, it avoids probate and goes to whoever you’ve named as a beneficiary, which could be your trust.

What this accomplishes is allows you to protect the tenancy by the entities while alive, i.e. maintains asset protection, but also avoids probate upon death.

When Should You Deed the Property to the Trust?

Typically, the only time a deed should be deeded directly to the trust is when an asset protection trust, like a Castle Trust (tm) is used.  In this situation, the home should be placed directly in the trust because that is how you can protect against long-term care costs, such as the Medicaid look-back period or estate recovery.

What Should You Do Next?

Attend a Free LifeCare Planning Workshop Button

Take the next step in the learning process and attend one of our upcoming LifeCare Planning Workshops where all of your questions will be answered on which to do, whether to deed to the trust or not.

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