0

What Is a Ladybird Deed in Michigan?

A Ladybird deed is a specific type of warranty deed or quitclaim deed that allows you to transfer real estate to someone else outside of probate, while retaining a life estate in the property. This is actually an “enhanced life estate” because, unlike a regular life estate, a Ladybird deed gives you the power to retain control over the property during your life, including the right to use it for profit and sell it.

And yes, the name derives from Ladybird Johnson. It is legend that President Lyndon B. Johnson transferred real estate to his wife, Ladybird Johnson, through this type of deed for the first time.

Here is a common scenario that illustrates the benefit of a Ladybird deed:

If a widow/widower has adult children as POD beneficiaries of all of his/her assets. then it would make sense to convey his/her real estate to all of the children via a Ladybird deed and avoid the need for probate.  This mechanism is better than adding the children as joint owners in a quitclaim deed. If the children are also partial owners of the property, then if a child were to file for bankruptcy or file for a divorce or get sued, the property could be considered an asset reachable by the creditor while the parent is alive. So if the goal is to simply avoid probate upon the owner’s death, then a Ladybird deed would work – it is akin to adding a beneficiary designation to the real estate. The beneficiary’s interest in the property does not vest until the owner’s death and the potential risks of adding a new owner during the owner’s lifetime are avoided.

If you have any questions, please do not hesitate to contact me.