A large part of estate planning is finding ways to keep your assets out of probate. Most people know that assets such as life insurance policies and retirement accounts allow you to add beneficiary designations directing who should receive those accounts after the owner’s death. But what about real estate?
A recent trend in estate planning is the utilization of beneficiary deeds or ladybird deeds to transfer real estate outside of probate. In Michigan, a property owner can transfer property via a ladybird deed. The story goes that the name of the deed is derived from the first ladybird deed supposedly used by President Lyndon Johnson to transfer property to his wife Claudia “Ladybird” Johnson. Whether the story is true or not, the question is: how does the ladybird deed work? An owner of real property designates who should receive that property upon his or her death, while at the same time retaining the power to sell or transfer the property without needing to get the beneficiary’s permission.
This can be beneficial in a number of ways. A widow or widower can use this type of deed to transfer his or her interest in real estate to his adult children outside of probate. A ladybird deed can even be used to transfer the property to a trust upon death. A couple benefits to using this method of transfer instead of an outright transfer of the property to the trust include:
The ladybird deed is even effective as a tool in Medicaid planning. Approved by the Michigan Department of Health & Human Services, a ladybird deed is considered a transfer-on-death document which means it is not counted as part of a probate estate and is therefore exempt from Medicaid recovery proceedings.
To explore whether a ladybird deed could be beneficial to your estate plan contact the office today.
Jessica Brandow is foremost an estate planning attorney dedicated to providing quality legal service to all types of clients.