One of the most common worries about a Lady Bird deed is "What if I need to sell the house?" Maybe you're downsizing, moving closer to family, or going into assisted living. The good news: a properly drafted Michigan Lady Bird deed lets you sell, refinance, or change your mind without asking the people you named. Here's how that works in practice, and what to expect at closing.
The Short Version
- A Lady Bird deed keeps a life estate for you plus the power to sell, mortgage, or give away the home on your own.
- Your remainder beneficiaries don't have to consent or even be told.
- If you sell, the sale proceeds are yours, and the beneficiaries' future interest simply ends.
- The normal home-sale tax rules apply to you as the seller.
- Bring a copy of your recorded Lady Bird deed to the title company early so there are no surprises.
Why You Can Sell Without Your Beneficiaries
A regular life estate deed splits ownership: you have the right to live there, and your beneficiary owns the future interest. To sell, you'd need them to sign. A Lady Bird deed is different because it "enhances" your life estate with a reserved power to convey.
Michigan recognizes this through Michigan Land Title Standard 9.3, which, as quoted in the Michigan Bar Journal, provides: "The holder of a life estate, coupled with an absolute power to dispose of the fee estate by inter vivos conveyance can convey a fee simple estate during the lifetime of the holder. If the power is not exercised, the gift over becomes effective."
In plain English: while you're alive, you can sell the whole property. If you never do, it goes to your beneficiaries when you die. The Michigan Bar Journal describes this power as giving the grantor "complete discretion to occupy, use, encumber, or sell the property without notice to or consent by the remainder beneficiary." Michigan State University Extension describes it the same way: the grantor can "encumber the property, change the beneficiary, sell or otherwise convey the real estate."
This only works if your deed actually contains the enhanced-life-estate language. A deed that reserves a plain life estate does not give you this power. See common Lady Bird deed mistakes.
Selling the House: Step by Step
- Find your recorded deed. Get a copy from your county register of deeds if you don't have one. See recording a Michigan Lady Bird deed.
- Read the reserved-powers clause. Look for language reserving the power to "sell, convey, mortgage" or "dispose of" the property without the beneficiaries' consent.
- Give the deed to your title company at the start. The title examiner will review it and confirm you can sign alone. Title companies handle Lady Bird deeds regularly in Michigan, but getting it to them early avoids delays.
- Sign the sale deed as the seller. You exercise your reserved power by signing the deed to the buyer. Some title companies like the deed to the buyer to say you are exercising the power reserved in your earlier deed. Ask what wording they prefer.
- Close as usual. The buyer receives full ownership. Your beneficiaries' interest is gone.
If a title company or lender asks your beneficiaries to sign anyway, ask why. A properly drafted Lady Bird deed shouldn't require it. If the deed's wording is unclear, that's a good time to have a Michigan real estate attorney look at it.
Who Gets the Money?
You do. The sample deed language in the Michigan Bar Journal reserves the power to sell "without the consent of anyone else during their lifetimes and to retain the proceeds therefrom." Your beneficiaries have no claim to the sale price.
One important consequence: once you sell, the Lady Bird deed has done nothing to plan for that money. The cash sits in your bank account and will pass under your will, your beneficiary designations, or a trust. If you sell, update the rest of your plan. A payable-on-death designation or a funded living trust can keep the proceeds out of probate. See POD and TOD beneficiary designations.
Taxes When You Sell
Because you keep control, you are generally treated as the owner when you sell, and the usual home-sale rules apply. According to the IRS, you may be able to exclude up to $250,000 of gain, or up to $500,000 on a joint return with your spouse, if you owned and used the home as your residence for at least 2 of the 5 years before the sale. Talk to a tax preparer about your situation.
Compare that to keeping the home until death. The Michigan Bar Journal explains that property passing by Lady Bird deed is included in the grantor's estate for tax purposes and the beneficiary gets a step-up in basis, so "little or no taxable gain should result from a sale of the property promptly after death of the grantor." See what happens after death.
Refinancing or Taking a Home Equity Loan
The reserved power usually includes the power to "mortgage" or "encumber" the property, so you can generally refinance or take out a home equity line on your own. The Michigan Bar Journal sample language lists "mortgage, lease, encumber" among the reserved powers.
Practical tips:
- Tell your loan officer up front that the home has a Lady Bird deed, and send the recorded copy to the lender's title company.
- Ask how the loan will be handled after your death. Your beneficiaries will need to deal with any balance still owed. Keep that in mind when deciding how much to borrow.
- Some deeds include a clause saying a later mortgage is only a security interest, not a full conveyance that ends the beneficiaries' interest. If your deed is silent, ask the title company whether it sees any issue.
Changing Beneficiaries Instead of Selling
Sometimes you don't want to sell; you just want different beneficiaries. You can usually do that by signing and recording a new deed. The Michigan Bar Journal discusses a Court of Appeals case holding that the reserved powers let the grantor "deal with the property as if the grantor had remained the sole owner," including changing "the identity of the remainder beneficiary without the remainder beneficiary's approval."
Always record the new deed. An unrecorded change can leave confusion at your death.
When It Gets Complicated
- You're incapacitated. Someone else may need to sign for you. Whether an agent under a durable power of attorney can exercise your Lady Bird powers depends on the POA's wording, and some situations need a conservator. Get legal advice.
- Medicaid. Selling turns the house, which may have been protected, into cash, which counts as an asset. If you're on or applying for Medicaid, get advice before you list the home. See Michigan Medicaid planning.
- Co-owners. If you and someone other than your spouse both reserved powers, read whether one of you can act alone or both must sign.
- Unclear wording. Older or homemade deeds sometimes reserve a plain life estate by mistake. If so, your beneficiaries may need to sign.
Frequently Asked Questions
Do I have to tell my kids I'm selling?
Legally, no. The Michigan Bar Journal describes the power as exercisable "without notice to or consent by the remainder beneficiary." Whether you tell them is a family decision.
Can my beneficiaries stop the sale?
Not with a properly drafted enhanced life estate deed. Their interest only takes effect if you still own the home at death.
Can my beneficiaries' creditors stop a sale?
The Michigan Bar Journal notes that a remainder beneficiary's interest can technically be reached by their creditors, but that the grantor "could divest the remainder beneficiary's interest and defeat their creditor claims by a subsequent conveyance."
Should I use a trust instead?
A living trust also lets you sell freely, and it can hold the sale proceeds too, so they stay organized and out of probate. See Lady Bird deed vs. living trust.
Plan for More Than Just the House
A Lady Bird deed covers your home. It doesn't cover your bank accounts, investments, or the money from a future sale. The CreateMIWill Trust Kit ($197) includes an attorney-drafted Michigan revocable living trust with a certificate of trust and instruction and signing guides, so the rest of your assets have a plan too. The Complete Bundle ($349) adds a Michigan will, durable power of attorney, and patient advocate designation. CreateMIWill kits do not include a Lady Bird deed form. For the deed itself, use a Michigan attorney or a form you've confirmed includes the enhanced-life-estate language.
Michigan Trust Kit or Complete Bundle
Attorney-drafted Michigan revocable living trust with certificate of trust, funding instructions, and signing guide. Instant download.
Sources: Michigan Bar Journal, "Ladybird deeds: Key features and uses"; Michigan Bar Journal, "Ladybird Deeds: Purposes and Usefulness"; MSU Extension, "Overview of Lady Bird Deeds in Michigan"; IRS Topic No. 701, Sale of Your Home.