Do I need a Lady Bird Deed?

In this episode, Chris Berry answers: What is a Lady Bird Deed? Do I need one?

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.

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What is a ladybird deed? Do I need one?

Welcome to Berry’s Bites, please join our host attorney and financial advisor Chris Berry.

The big issue is dealing with real estate so a lot of times when we’re talking about estate planning one of the first things is dealing with a stated administration because everyone wants to avoid probate upon death and so with the state administration need to understand how assets transfer upon death and so first would be joint ownership so joint ownership great for a married couple wouldn’t recommend naming anyone else joined to any of your accounts.

I wouldn’t recommend naming any of your kids joined to your real estate because you’re opening yourself up to all the potential liabilities of that person second would be beneficiary designations. So I met with a family today mom was living with sun just had a couple of bank accounts and a life insurance policy didn’t really have much but we wanted to stress that with those bank accounts at the credit union that they were transfer on death or payable on death to someone to avoid probate third would be a trust not everyone needs a trust but there’s a lot of good reasons why you may want to consider a trust but if nasa doesn’t go through one of the first three ways then it ends up going into probate.

And we want to avoid this because it’s time consuming so it’s a five month at least process in Michigan and typically three to five percent of any assets get eaten up in fees whether it’s inventory fees filing fees publication fees etc it’s time consuming and then the cost that’s why people want to avoid probate. So what’s the one thing I didn’t mention a while because a will does not avoid probate what a will does is it gives instructions to the probate court and how to administer your estate so if you have like liquid assets like 401ks IRAs life insurance a lot of times those are handled through beneficiary designations but where people get hung up is on real estate because you would never want to name your kids joint on your real estate.

There’s a bunch of reasons why that’s a bad idea from a tax standpoint from a liability standpoint just a bad idea so how do we avoid probate with real estate so one option is you can name the trust as the owner so we’ll deed it directly into the trunks the other option is we can do what’s called a ladybird what a ladybird deed is is a type of deed to say that it’s in your name all your life and then upon death it goes into the trust so basically it’s kind of like a beneficiary designation for your home so your home is yours you can do whatever you want while you’re alive and well but then upon death goes into the trust or it goes to whoever you’ve named as a beneficiary thereby avoiding probe we do a ton of these lady bird deeds anytime you have a revocable living trust or a will based estate plan in your own real estate we’re almost always doing a ladybird deed we probably do conservatively like 500 ladybird deeds a year like we do a ton of lady birdies now when would you not do a ladybird deed if you’re setting up an asset protection trust so if we’re deeding the property directly to the trust then would deed it directly into the castle trust because then you could sell the property and the proceeds of the sale would be protected.

Another nice thing about the lady bird deed so what does it do big thing is it avoids probate and then also what it can do is avoid the state recovery upon death so if you still own the home and you were to need medicaid the home would be exempt and then with the lady bird deed to avoid that estate recovery where they could place a lien on your home upon passing so if you own real estate really there’s two options one is that ladybird deed the other is we would deed that home directly to the asset protection trust and really those are the only two ways that typically we deal with real estate if you have second pieces of property i guess a third option might be like a rental property we might put that into an llc then we would assign to the trust my point with this don’t forget about real estate when it comes to putting together your estate plan and coming up with plan to avoid probate lady bird deed great tool. Thank you.

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