My friend has a lady bird deed and says I need one to. I want one! Wait what is it?

A Lady Bird Deed is a special type of deed. To show how it works, we’ll use your home as an example. You own your home (whether you have a mortgage or not). When you sign a Lady Bird Deed, you convey your home to yourself, but you reserve the power to sell, mortgage, gift (or otherwise transfer) your home during your lifetime. If you don’t convey your home during your lifetime, the Lady Bird Deed identifies who receives your home after you die. This can be one or more individuals, or it can be a trust. Having a lady bird deed can provide the following benefits currently under Michigan law:

Lady Bird Deeds avoid probate. The property goes directly where you want it to go, without getting the Michigan probate court involved.

Lady Bird Deeds are Medicaid friendly. If your home is in a trust, it is “countable” for Medicaid purposes. A Lady Bird Deed avoids this problem, and is not considered a “divestment” for Medicaid purposes.

Lady Bird 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 Lady Bird 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 Lady Bird Deed is a great way to avoid estate recovery.

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.

A Lady Bird Deed can be a great estate planning strategy when combined with your other estate planning tools.