Michigan does not have a statutory Transfer on Death Deed (TODD) for real estate, the way some states do (see below).
However, Michigan does allow a similar, common-law option called a LadyBird Deed, which is officially known as an "Enhanced Life Estate Deed."
This deed functions very similarly to a TODD, allowing you to avoid probate for your property.
This type of deed allows a property owner to retain control over their property during their lifetime, including the right to sell or modify the property, and upon their death, the property automatically transfers to a designated beneficiary without going through probate. This is beneficial for avoiding the time-consuming and often costly probate process.
Key features of a Lady Bird deed include the ability to bypass probate, thus facilitating a smoother transition of property to the beneficiary upon the owner’s death. It also provides several tax benefits, such as allowing the property owner to retain the principal residence exemption and preventing the uncapping of the property's taxable value upon transfer to the beneficiary.
Additionally, the remainder beneficiary receives a step-up in basis, reducing the taxable gain if the property is sold after the owner's death.
For estate planning purposes, Lady Bird deeds can preserve the owner's eligibility for Medicaid benefits, as the transfer does not count as a disposition of assets under Medicaid rules .
While there is no statutory form specifically for a Lady Bird deed in Michigan, its creation is supported by Michigan Land Title Standards, particularly Standard 9.3. This standard recognizes the legal power of someone who owns a life estate and has an absolute power to transfer complete title during his or her life. It's crucial for a Lady Bird deed to include certain elements to be effective:
- A valid legal description of the property.
- Vesting language that describes the transfer and any warranty of title provided by the deed.
- A statement of consideration, if applicable.
- Compliance with Michigan's recording laws and standards in terms of formatting.
- Specification of the form of co-ownership if multiple remainder beneficiaries are named.
- The property owner's notarized signature with an acknowledgment form that complies with Michigan law.
After the deed is signed and notarized, it should be recorded as soon as possible with the register of deeds in the county where the property is located. The cost of creating a Lady Bird deed is relatively low, typically less than $500, including legal fees for drafting the document and a recording fee charged by counties, usually around $30 (Michigan Bar Association).
Due to the unique characteristics and benefits of a Lady Bird deed, consulting with an experienced estate planning attorney is often recommended. An attorney can help ensure the deed is properly drafted to suit your specific situation and goals, including its integration into a broader estate plan (Michigan Bar Association).
TODDs in Other States
If you're lucky enough to own your primary residence in one of the 30 states that offer TOD (Transfer on Death) Deeds, it's a great way to transfer your house and avoid probate without the need of a living trust.
- Nolo offers an excellent overview of how to use transfer and death deeds, and how a new owner claims TOD real estate.
- eForms offers Transfer on Death Deeds for 30 different states.
- WillMaker, now includes Transfer on Death Deeds as part of the WillMaker package,
How to Use a TOD Deed:
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Determine Eligibility: First, ensure that the state in which the property is located allows TOD deeds.
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Obtain a TOD Deed Form: You can find forms online or get one from a local attorney. Some county recorders' offices might also provide these forms.
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Complete the Form: You'll typically need to provide details such as the legal description of the property, the current property owner's details, and the beneficiary's details.
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Notarize: Most states require the deed to be notarized. This means signing the deed in the presence of a notary public.
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Record the Deed: Once completed and notarized, the TOD deed must be recorded with the county recorder's office where the property is located. There might be a small fee associated with this.
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Revocation or Change: If you change your mind later on about the beneficiary or wish to revoke the TOD deed, you usually can. This typically involves recording another document (often another deed) that changes or cancels the earlier filed TOD deed.
States That Allow Transfer on Death Deeds (as of 2022):
Western states and Midwestern States allow them, but not so much in the Northeast.
- Alaska
- Arizona
- Arkansas
- California
- Colorado
- District of Columbia
- Hawaii
- Illinois
- Indiana
- Kansas
- Maine
- Minnesota
- Mississippi
- Missouri
- Montana
- Nebraska
- Nevada
- New Mexico
- North Dakota
- Ohio
- Oklahoma
- Oregon
- South Dakota
- Texas
- Utah
- Virginia
- Washington
- West Virginia
- Wisconsin
- Wyoming
Some other states might have similar mechanisms but under different names or procedures. It's always wise to consult local legislation or a local attorney to understand the current rules in a particular state.
Ladybird Deeds
A Lady Bird deed, often referred to as an "enhanced life estate deed," is a legal document that changes the rights to real estate property ownership. It allows the owner (grantor) to retain complete control over the property during their lifetime, including the ability to sell, lease, or mortgage the property without the beneficiary's consent. Upon the grantor's death, the property automatically transfers to the beneficiary without having to go through probate.
Key features of a Lady Bird deed:
- Control: The grantor maintains full control over the property during their lifetime.
- Avoidance of Probate: Upon the grantor's death, the property transfers directly to the beneficiary without the need for probate.
- Flexibility: The grantor can change the beneficiary or sell the property without the beneficiary's consent.
- Tax Benefits: In many cases, because the transfer is only effective upon death, the grantor doesn't incur gift tax, and the beneficiary can benefit from the "step-up" in basis, which can reduce capital gains taxes if they later sell the property.
States That Allow Lady Bird Deeds (as of 2022): While the use and formal recognition of Lady Bird deeds vary by state, they are most commonly associated with and used in:
Other states may have similar mechanisms or might recognize the concept, but the specific rules, nomenclature, and characteristics might differ.
If you're considering using a Lady Bird deed or any other estate planning tool, it's essential to consult with an attorney familiar with real estate and estate planning laws in your state. They can provide tailored advice and ensure that all documents are prepared and recorded correctly.
AI Prompts for More About TOD or Ladybird Deeds in Michigan
Prompt: Does Michigan allow Transfer on Death (TOD) or Ladybird Deeds to transfer real estate at death without requiring probate? And if Michigan allows either one, Can you explain how the process works in Michigan, cite relevant statutes, and link where I can get the correct forms for Michigan?
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