The Lady Bird Deed: How Michigan Passes a House Without Probate

Most ways to hand a house to your kids at death make you give up something now. A joint owner who can be sued. A trust you have to fund. A gift that starts a clock. The Lady Bird deed is the odd one that asks for nothing. You sign it, record it, and the house still answers to you alone. Sell it next spring. Take out a home equity loan. Name a different child on a fresh deed. You never have to ask the people who’ll inherit. They get whatever is left the day you die, and only then.

The trick is a reserved power that lets you undo the whole thing — a general power of appointment, in the language of the deed. Because you never actually gave anything away while alive, the transfer isn’t finished until your last breath, and a transfer that finishes at death skips probate. Your heir records your death certificate and steps into the title.

That “not finished until death” quality is what makes the rest work. Since you still own the place, the state doesn’t treat the deed as a transfer. So your taxable value stays capped, and your Principal Residence Exemption rides along untouched. One catch is worth knowing before you sign. The cap survives your death only if the house lands with a qualifying relative — a spouse, child, grandchild, parent, or sibling — on a home that stays non-commercial. Deed it to a friend or a nephew and the taxable value uncaps the moment you’re gone. That can nearly double the tax bill.

The quieter benefit is Medicaid. A plain old life estate is a completed gift. It can trip the five-year lookback and get clawed back later. A Lady Bird deed isn’t a gift at all — you could revoke it Tuesday — so it’s no divestment. And Michigan’s estate recovery program can only reach what passes through probate. The house sails right past it. The Michigan Supreme Court drew that probate-only line hard in the Rasmer cases in 2017. That’s why elder-law attorneys reach for this deed so often. Heirs also inherit at the home’s date-of-death value. A house bought for $40,000 and sold for $300,000 carries little capital-gains sting.

It’s a sharp tool with fiddly edges — the relative rule, the exact wording of the reserved power — so it’s an hour with a Michigan attorney, not a form off the internet. Done right, it’s the rare piece of paper that gives your heirs the house and gives you nothing to lose in the meantime.