What Is a Lady Bird Deed? | Michigan Estate Planning Lawyer Explains What Is a Lady Bird Deed

Michigan Elder Law Attorney, Christopher J. Berry, Esq., CELA talks about Lady Bird Deed today on Berry’s Bites.

Here is the auto-generated transcript:

Hi there. This is Chris Berry certified elder law attorney with Castle Wealth Group Legal. Today on Berry’s Bites, which are just bite-sized pieces of knowledge on estate planning, elder law, asset protection. Today, we’re going to talk about ladybird deeds.

What is a lady bird deed? So a lady bird deed is a type of deed we use a lot in our office, and it’s a type of deed that works for your home or other pieces of real estate, where the home would remain in your name and upon death, it avoids probate and goes to whoever you’ve named as a beneficiary. So it acts almost like a beneficiary designation for your home. So you can refinance it, you can do whatever you want with it while you’re alive, but then if you were to pass away, it avoids probate and goes to whoever you’ve listed as a beneficiary, which a lot of times might be trust.

So it’s a great way to fund a living trust. Now also what a lady bird deed does is that it avoids estate recovery as we have it right now in Michigan. It takes a moment to talk about estate recovery because it talks about or brings in what’s called Medicaid. So Medicaid is a way to pay for longterm care in a nursing home. Right now a nursing home costs about $8,000 to $12,000 a month in Michigan.

We have a governmental program called Medicaid that’ll help pay for the cost of care in a nursing home, but to qualify for Medicaid, a single individual can only use or have $2,000 worth of countable assets. Then the state of Michigan places a lien on the home after that individual passes away if the real estate ends up in probate. So what the lady bird deed does is it avoids probate upon death and also avoids estate recovery if you were to need any type of longterm care like nursing home care.

Now that said, it’s not the perfect tool, because understand if you were to sell that home all of a sudden the home goes from exempt to now a countable asset. So if nursing home costs are a big concern for you a lady bird deed may work, but you might want to look at a castle trust, which is a type of trust that builds asset protection. Whereas soon as you move the home into the trust, once you make it past five years, because Medicaid looks back five years to see if you moved any money around. If you have, they’re going to penalize you. But with the castle trust does, once you make it five years, everything inside of the trust is protected from that nursing home or Medicaid spend down and likewise would be protected from that estate recovery.

So if you were to move the home into the Castle Trust and then sell the property, the proceeds of the sale would be protected. That’s something that’s a little bit different than with the lady bird deed. With the lady bird deed the home needs to remain in the individual’s name until they pass away, and then it will avoid estate recovery. You cannot sell the home and convert that real estate to cash and keep it protected if you’re using a lady bird deed.

So a Ladybird deed, it’s a great, simple way to avoid probate and avoid estate recovery as we have it now. If our major concern is just avoiding probate, making sure your stuff goes where it’s supposed to upon death, we’re utilizing a lot of lady bird deeds. But if asset protection is the biggest concern, then we might set up an asset protection trust like a castle trust, and then move that home into the trust because now we could sell it if we wanted to. You have more flexibility that way.

So a lady bird deed, it’s a great tool. We use it quite often in our office. It’s one of the best ways to avoid probate. I might be asking, “Well, what about a quitclaim deed or a quick claim deed?” We call this the deed in the drawer trick where you sign a deed, but you don’t record it. There’s a lot of problems with this.

You can run into issues with the city tax assessors. If you lose the deed, the home ends up going into probate. So an aboveboard way to handle things would be to utilize a lady bird deed. So if you want some more information on lady bird deeds, just give our office a call. (844) 885-4200. Again, (844) 885-4200. This has been Chris Berry with Castle Wealth Group Legal, as we talk about what is a lady bird deed today on Berry’s Bites. Hopefully, you found this helpful, take care.

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