Probate Avoidance Tools in Michigan: Trusts vs Lady Bird Deeds vs Joint Tenancy
Michigan probate is not the disaster some seminar speakers make it out to be, but avoiding it can still save your family months of court time, thousands in fees, and a lot of emotional energy. The three main tools Michigan residents use to keep a home out of probate are the revocable living trust, the Lady Bird deed, and joint tenancy with rights of survivorship.
Tool 1: Revocable Living Trust
A revocable trust is a legal entity that holds assets during your life and distributes them at death without court involvement. You serve as your own trustee, retain full control, and can revoke or amend at any time. Upfront cost: $1,500 to $4,000 for a typical Michigan trust package.
Tool 2: Lady Bird Deed (Enhanced Life Estate Deed)
The Lady Bird deed is a Michigan favorite. It conveys property to your chosen beneficiary at your death while you retain full control during life. Inexpensive ($300 to $800). Preserves the step-up in basis under IRC Section 1014. Generally avoids Michigan property tax uncapping at death when paired with the family transfer exemption under MCL 211.27a(7)(s).
Tool 3: Joint Tenancy with Rights of Survivorship
Adding a child or other person to the deed as a joint tenant means the property automatically passes to the survivor at death without probate. This is the cheapest option upfront but often the worst long-term: exposes the property to the joint tenant’s creditors, only partial step-up in basis at your death, and you cannot sell or refinance without their consent.
Tax Treatment Comparison
Lady Bird deeds and trusts both preserve the full step-up in basis under IRC Section 1014. Joint tenancy only gives a partial step-up on the decedent’s share. Michigan has no state estate tax or inheritance tax, but federal income tax on capital gains absolutely applies.
Property Tax Uncapping
Michigan caps annual taxable value increases at 5% or inflation under Proposal A. Transfers can uncap the property. Lady Bird deeds and trusts can usually be structured to qualify for the family transfer exemption under MCL 211.27a(7)(s). Adding a non-qualifying joint tenant can trigger uncapping immediately.
Which Should You Use?
- Simple estate, just the house, one beneficiary: Lady Bird deed
- Multiple properties, accounts, or out-of-state real estate: revocable trust
- Blended families or complex distributions: revocable trust
- Avoid joint tenancy with anyone other than a spouse in nearly all cases
- Combination approach: trust for accounts plus Lady Bird deed for the home is common
What If a Loved One Did Nothing?
If your parent or relative passed away without any of these tools in place, the home will go through probate. Offer Now Michigan can buy the property as-is and close in 2 to 3 weeks. Call (810) 547-1135.