June 09, 2021
What is a Lady Bird Deed? | Michigan Estate Planning Lawyer Explains What a Lady Bird Deed
What is a Lady Bird Deed?
Michigan Estate Planning Lawyer Explains What a Lady Bird Deed
MichiganEstatePlanning.com | 844-885-4200 Michigan Elder law attorney Christopher J. Berry, Esq., CELA explains what a lady bird deed is in Michigan and why you may want to use it as a tool. Though you should consider whether a lady bird deed or Castle Trust™ makes more sense if long-term care is a concern.
A lady bird deed avoids probate in Michigan and can protect against long-term care costs. It acts like a beneficiary designation.
Estate Attorney and Advisor Chris Berry of Castle Wealth Group answers questions on retirement and estate planning every Wednesday at 1pm. Register via this link or give our office a call at 844-885-4200.
Castle Wealth Group and Christopher Berry help families with estate planning, elder law, retirement planning, and tax planning from their offices in Brighton, Ann Arbor, Livonia, Bloomfield Hills, and Novi.
Castle Wealth Group helps families with their legal, financial, and tax planning for their retirement and legacy.
With the use of legal structures like revocable living trusts, Castle Trusts (asset protection trusts), Chris Berry and Castle Wealth Group can help your family plan, protect, and preserve what is important through their Retirement and Legacy Blueprint Process.
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Episode Transcript
Lady Bird Deed
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 lady bird deeds or what is a lady bird deed. So a lady bird deed as a type of deed we use a lot in our office, and it’s the 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 a trust. So it’s a great way to fund a living trust. Now, also what a lady bird deed does is that it avoids a 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 long-term 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 a home after that individual passes away if the real estate ends up in probate. So with the lady bird deed does is it avoids probate upon death and also to avoid the estate recovery if you were to need any type of long-term 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 an asset protection, where as 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, and if you have, they’re going to penalize you, but what a 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.
Castle Trust
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 a lady bird deed, the home needs to remain in the individual’s name until they pass away, and then it’ll avoid a state 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 lady bird deed, it’s a great simple way to avoid probate and avoid a state 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. You might be asking, “Well, what about a quick claim 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 a 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.