Your home may be one of your most valuable assets. Naturally, you want to make sure it passes to the right person after your death. You may also want your family to avoid probate, the court process for handling someone’s estate.
In Michigan, a living trust and a Lady Bird deed can help you reach these goals. However, they work differently, so your choice depends on your needs.
How does a Lady Bird deed work?
A Lady Bird deed, also called an enhanced life estate deed, lets you name someone who will receive your home after you die.
However, you have control over your property throughout your life. You can sell it, refinance it or change who will inherit it without getting the future owner’s permission.
Other benefits include:
- Your home can pass directly to your chosen beneficiary without probate.
- You can continue living in the home.
- You generally need fewer documents than you would for a trust.
Michigan recognizes Lady Bird deeds as an estate planning tool. However, this deed only addresses the property it covers. It does not help you manage your other assets.
How does a living trust work?
A revocable living trust offers a broader way to manage your property. You create the trust and transfer ownership of your home into it. You can also place other assets in the trust, including bank accounts and investments.
As long as you remain able to manage your affairs, you can usually control these assets and change the trust’s terms.
A living trust offers several benefits:
- Your successor trustee can manage trust assets if you become unable to do so.
- Your beneficiaries can receive trust assets without probate.
- You can set rules for when and how beneficiaries receive their inheritance.
However, a trust requires more planning. You must also transfer your home into the trust properly for it to work as intended.
How can you choose the right option?
If your main goal is to pass down one home, a Lady Bird deed may meet your needs. However, a living trust may offer more flexibility if you own several assets or want someone to manage them if you become incapacitated.
You should also consider property taxes. Under Michigan’s property transfer rules, some ownership changes can increase a home’s taxable value. The outcome depends on the type of transfer and any available exemptions.
An estate planning attorney can review your property, family needs and long-term goals. This guidance can help you choose an option that protects your wishes while reducing future problems for your family.