In this issue of “Ask the Expert” local estate planning attorney, Rebecca J. Braun explains how they can keep their home out of probate upon their death.
How Do I Avoid my Home Going into Probate at my Death?
Drafted by Rebecca J. Braun, J.D., CDP
Over my years of practicing estate planning and probate law, I have found one commonality through almost all of my clients; they want their assets to avoid being probated upon their death. When I hear this, the first thing I try to explain is that the probate court is not the end of the world. If that’s what needs to happen then we try to make it as quick and painless as possible. The second thing I explain is that if their goal is to avoid probate, we can absolutely make that happen with some preplanning.
With most assets we can set up beneficiary designation forms. These forms are created with the financial institutions that hold the particular asset or account. This creates a payable-on-death agreement with the institution. Upon the death of the account holder, the institution is notified, and the assets held in the account are paid over to the named beneficiary with no need to open a probate estate.
Real estate is treated differently under the law. In order to transfer property a deed needs to be signed by the person who owns the property, or a person who has legal authority to act on that person’s behalf. Without any preplanning, a home will need to be probated in order for a legal transfer to take effect.
One option I often explore with my clients is the creation of a revocable living trust. These types of documents are preplanning tools that can hold assets during the creator’s lifetime and after their death. A trust can hold real estate and upon the creator’s death, the trustee can sell or distribute the home to the beneficiary, in accordance with the terms of the trust. When a home is held in trust, it does not need to be probated because the trustee has the authority to sign the deed for transfer.
Another option we discuss is establishing an enhanced life estate deed, otherwise known as a Ladybird deed. A Ladybird deed can be a great tool for someone who wishes to leave their property to a beneficiary upon their death but does not want their property to be subject to the probate court. This deed allows the property to transfer directly to the individual named in the deed without the hassle and expense of going through probate. This type of deed creates a remainder interest which allows the present home owner to retain all control and ownership but name a beneficiary upon their death.
Another use of the Ladybird deed is by someone who wishes to gift property at death but may need to apply for Medicaid benefits within the next five years. Use of a Ladybird deed is not considered a present transfer or gift as no official transfer of title takes place until the grantor (person who owns the home) dies. This is a preferred planning strategy over creating joint ownership, as adding someone to a deed without money changing hands is considered a gift and can result in a significant disqualification period for Medicaid benefits.
Ultimately, there are pros and cons to all planning strategies and no ‘one-size-fits-all’ planning approach. If you are unsure of what makes the most sense for you, or if you have additional questions, please contact our office for a free telephone consultation.
About Mobile Legal Services, PLLC
Mobile Legal Services, PLLC, is an estate planning, probate, and elder law firm. We offer travel services to our clients at no additional charge and service Wayne, Oakland, Washtenaw, Livingston, and Southern Macomb County.
Our phone number is 734-407-7657.
Our website is MobileLegalServices.com
We are located at 43155 Main Street, Suite 2300AA, Novi Michigan 48375.