Estate Planning and Lady Bird Deeds

Today, we'll be discussing estate planning and Lady Bird deeds. Hello and welcome to Money Talks. My name is Ken Wink from Summit Financial Consulting here in Southeastern Michigan. If you'd like more info about what you hear during our show today, give us a call, 586-226-2100. Or of course, you can visit us on the web, www.summitfc.net. I encourage you to check out the podcast page when you go to our website. You can look at our past shows and you can subscribe on Apple Podcasts, Spotify, or Amazon Music. So today's episode is very relevant for anyone that owns a home, anyone that is trying to do some planning for their family, for how their estate's handled after they're gone, basically anyone who's just wondering how property gets passed on. We're gonna talk about two very important legal tools, quick claim deeds and ladybird deeds. Since I'm based in Michigan, and most of you that are listening and watching are too, we're going to focus specifically on how these tools work here in Michigan. Michigan's one of the small number of states, only five, that recognizes a ladybird deed. So we're lucky here in Michigan, we can use these ladybird deeds. But before I jump in, let me introduce my co-host for today, Tony Shore. Tony, last week we did a show about estate planning like wills and trusts. And I met with two of my clients, Ernie and Lorraine, who are from Florida, but they were in town visiting family here in Michigan. And they specifically asked me to do a show about deeds. So I'm honoring that promise. So they listened to the show. First of all, that's good. Yeah, well, here's the really good news, Tony. Lorraine told me, you know what, Ken? Some of those shows you guys do are actually pretty good.

Is that how she puts it? Isn't that a nice compliment? Oh, that's what they call damning with faint praise, I think. The terminology used there. That is funny. Some of them are actually good. Pretty good. That is good. That is good. I assume that I'm her favorite. I have to assume. Oh, yeah.

Of course.

No. Ken, you're everyone's favorite. That's great, though. So they wanted you to do a show on deeds?

That is correct, yeah.

Now, you said, let's clarify for the listeners, Lady Bird deed. Now, Lady Bird was the name of the first lady married to the president, Lady Bird Johnson. Everybody knows Lady Bird Johnson was married to the 36th president of the United States, Lyndon B. Johnson. Right. And so and Lyndon B. Johnson was actually vice president under John F. Kennedy. And of course, Kennedy got shot. So then he became president from what was it, 63 to 69. He was president. So and they called her Lady Bird. What does that have to do with deeds? I don't understand the connection or just they just use the same name or is there a connection?

Do you know that? the last that I read is that they just used the same name and that it didn't have a direct connection to her. That's according to my Googling. So we'll, we'll see. We'll let the viewers.

Because I always, I've heard of Lady Bird Dean, but I just, I'm like, well, Lady Bird Johnson was pretty famous and everyone called her Lady Bird. And that's interesting. Interesting. Okay. I find that interesting, but then I'm old and I love history. So yeah,

Yeah, I'm impressed that you made the quick connection there.

And yeah, if there's a more important literal update to that, I'll let everybody know. There's a lot going on, right?

Yeah. Yeah. And before we jump in, I've got to overemphasize, just like last week, I have been in hundreds and hundreds of trust meetings, but I am not an attorney. This is not legal advice today. If you need a referral for an estate planning attorney, please give us a call, 586-226-2100. Our attorney referrals give our clients a very significant discount because we send so much business their way. So their rates are very competitive. So If you don't have your own documents set up, please give us a call and we'll get you all situated.

Yeah, you got to have an estate plan in place and more than just a will. You know, you got to have those powers of attorney. You got to have a will and probably a trust like we talked about on last week's show. But what about deeds? Where do you want to start here?

Let's start with the most widely used option, which is called the quit claim deed. So a quit claim deed is a legal document basically used to transfer ownership and real estate from one person to another. Right. So one important thing to remember that a lot of people don't realize is that it transfers whatever interest the person has. But it doesn't actually guarantee that the interest is valid or that it's free of any claims. So in plain English, it's basically just saying, well, I'm giving you whatever ownership I have, if any, and I'm not making any promises about it.

Wow. Okay.

Sounds bad. Yeah, it sounds a little risky, right? It can be useful in certain situations. So if you're transferring property between just family members and you're 99.9% sure the title is clean, that can be helpful. If you're going through a divorce and you got to remove a spouse from the title. So this is very common to use a quick claim deed in marriages and divorces. The most common way that we use it is when you're moving property into a trust or a business entity. And, you know, this is a really common way to use a quick claim deed because you're just transferring your property into your trust. And this way it helps to avoid probate.

And we want to avoid probate court because that ties properties and cash and everything else assets up for a while. And it costs extra money and you're leaving your loved ones a headache if you go to probate. So if it goes to probate.

Yeah, with probate court, the larger your estate, the more they will charge as an inventory fee. So, you know, probate can get very, very expensive. I've seen probate cost $5,000, $10,000, even one time $50,000. Wow. Because of things being challenged or the size of it.

year. I mean, you know, it can take anywhere from one month to a year. And usually it takes a few months and then everything's tied up during that time. You can't do anything. So that's rough. And you're paying a lot of money for attorneys. Love, love attorneys. Love it. Sure. Sure. And I want to clarify, I know this may sound silly, but when you say quick claim deed, sometimes people think you're saying quick claim deed, and that's not what it is. I, I know this discussion came up years ago. And I used to think people, when I listened, Oh, I'm listening to, I'm listening. And then I read about it and I'm like, Oh, it's quit. Yeah. Claim D. I can't quit you. Yeah. Quit with a T, not quick claim. People like people sometimes think that's what I want because it's I want a quick claim. It is quick and it is quick and cheap.

But it's you have to watch out. It sounds like. Right. Yeah, it doesn't require a title search. That's probably the biggest takeaway. So you don't want to sell your house to a stranger using a quick claim deed. So that would actually require a warranty deed. So a warranty deed takes a bit more work and a title search is required. So that's the type of deed that we normally see when people are selling properties to a stranger. But for the topic for today, an additional deed option that's out there is a beneficiary deed or a transfer on death deed. So this transfers ownership to beneficiaries and again, avoids probate. So that's the most common type of deed when someone's got a will.

And a lot of trucks just call quit claim deeds, transfer on death deed or a beneficiary deed. Right. You can put a beneficiary designation on a home, right? With as long as you have a beneficiary deed or a transfer on death deed. Yeah. And that's awesome. That's probably, I mean, a lot of people do that. And I know that that can really be a good way to do it. But what about Michigan, Florida, and a few others? There's only a handful of states that have these ladybird deeds. Tell us about that.

Yeah, so there's only five states that offer ladybird deeds. So Ernie and Lorraine down in Florida, they could take advantage of this as well. So a ladybird deed is officially called an enhanced life estate deed. And it's a unique deed that allows you to transfer property to beneficiaries, but you get to maintain control throughout your entire lifetime. Okay. So this is where it gets a little bit more interesting. So with a traditional deed, once you transfer the property, you lose control. Typically some control, if not all control. But with a ladybird deed, you get to keep full control. So that means even though you have this ladybird deed out there, you can still sell the property. You can still refinance it. You can still change beneficiaries. You can even cancel the deed. So you don't have to get permission from the person that you deeded it to. uh, to make these changes. So, um, one, like with a quick claim deed, a lot of times people will move their home into their trust, which is great. If they pass away, it's going to be really easy for the next generation to just pick up the ball and run with it. Yeah, that's what my wife and I did. Yeah. Yeah. And that's great. So the only real problem with that is that if for whatever reason you want to refinance the house or you want to get a home equity line of credit in Michigan here, there's been some concerns lately because people have been stealing other people's identities. and putting liens on people's houses. Yes, I've heard about that. You can do like a title steal. So one way to avoid that is to have a lien on your house. So I tell all my clients, you should not ever have a completely paid off mortgage with no home equity line of credit. Just get a home equity line of credit and don't ever use it. You don't have to put a dollar on it. Just have the line of credit open. That way no one can ever sort of steal your house out from under you. But that's actually happened sometimes in Michigan here. So you want to have some kind of a lien. And so on that point, so that's a good safety point for everybody today is have a home equity line of credit if your house was completely paid off to help avoid any type of thievery. Sure. But if the house is in the name of your trust, you got to take it out of the name of your trust, put it back into your name, then refinance the property or add the home equity line of credit, and then you can move it back into the trust. So just a little bit of extra legwork there. Unfortunately, some people are sort of. punished with a little extra work if they did their estate planning properly. But if you already have a mortgage in place, if you already have a home equity loan of credit or equity line of credit in place, you know, you can go ahead and put it in the name of your trust and safe and sound. It is the best way to do things, not trying to scare anybody off from that strategy, but just want to explain that.

Sure, sure. So what are some of the key advantages of a ladybird deed? Why would we want to do this?

So number one, it avoids probate. That's very good. That's what everybody's trying to do here. You can maintain control during your lifetime. You don't have to get the courts involved in any way, shape, or form after your death in most cases. But another... Big one, I guess, is that it is home protection for your spouse if you ever need long-term care down the road. Ah, okay. Wow. Yeah, so this could potentially be a big one. And generally speaking, when we're meeting with our clients, if they have a lot of money, we don't necessarily... push towards a ladybird deed, because a ladybird deed makes the most sense if you think you might be into trouble down the road, if you had to go into a long-term care facility. So with a long-term care facility, If you spend down your assets, you know, Medicaid will pay for you to have care. Yeah. But then after you pass away, in our case, the state of Michigan is going to come back and say, OK, we paid for all this care. Yeah. Let's take that house now.

Yeah. Most states do that. Yeah. Minnesota does as well. The state will put a lien on your house or. Yeah. To get that money back.

Yeah. So that's that's where a ladybird deed can come in handy because that will protect the house from the state. So basically, the state will end up paying for your long term care and you don't have to ever pay it back. And your family gets to keep the value of the house afterwards.

Nice. That's really handy. Wish we had that in Minnesota.

Yeah, it's definitely a neat estate planning tool. But I don't want, so I mentioned earlier, like if people have a lot of money, we don't necessarily recommend it. Medicaid facilities in Michigan are not the nicest places. You know, sometimes they're okay, but in a lot of cases, unfortunately, they're tough and you walk into them and you're hit with that smell of bodily fluids and it's just... Usually not where people want to spend their remaining year. So paying out of pocket is okay for long-term care. With our clients, we typically will recommend that they go to a facility that has two sections. One for people who are paying out of pocket and then a second section for people that are on Medicaid. The nice thing about most of those places is once you run out of money when you're paying out of pocket,

You can just move over. You can stay in the same place, just move to the Medicaid side. Yes, exactly. But because some places that are private don't accept Medicaid, so you have to watch out for that.

Yeah, it requires a lot of due diligence when you're getting ready to go into an assisted living facility, a nursing home, or a memory care center. And that's what we suggest our clients look for is – someplace that has both areas because of that typically smooth transition. And it's typically going to be a nicer facility if you got people paying out of pocket. If you just walk into a straight up 100%, every single person there is on Medicaid, there's a chance it's not going to be the nicest place in the world.

Yeah. Yeah. There is a good chance of that. There are some exceptions. You have to do your due diligence and research it. But I love the fact that a ladybird deed can help protect against the states coming back for long term care money. Yeah. For Medicaid. That's really good. Yeah. So Lady Bird Deeds, really important to understand. Is this, are deeds and this type of thing, I mean, it kind of goes along with estate planning. Ken, is this something that you and Summit Financial Consulting, is this part of what you do for people? Or I know you said you work alongside estate planning attorneys.

Yeah, I mentioned earlier that our estate planning attorneys are very kind to our clients and charge less typically for estate plans. One of the reasons they do that is that for our clients, we know their financial situation very well. So we will typically, basically what we told our attorneys is, what are all the questions you ask in the first appointment? when you're doing a trust meeting. Because for attorneys, time, understandably, time is money. So what we'll do is we'll actually ask all the questions that the attorney would normally ask for the attorney and then give the attorney on a silver platter all the answers to those questions. And a lot of those questions we can answer already because we're handling the money, right? Right. So because of that, they heavily discount their estate plan preparation fees. So our clients win and it's just a service that we provide. And in most cases, we've got the info handy anyway. So everybody wins. I would say we just don't want anyone to go through probate. It just costs a lot of money and takes a lot of time. And we feel people are better off just handling it privately and keeping their estates out of court.

Yeah. Well, and I think so, too. I think that's a great point. Is there anything else you want to add for our listeners before we go today, Ken? Any other advice?

No, just throwing out there that a ladybird deed would be most appropriate when you want to avoid probate. You want to keep full control of your home. You want a simple estate planning tool that can be used with a will or a trust. And maybe also if you're thinking about Medicaid planning and you want to make sure that your family gets gets the value of the house, you know, if you might need it down the road. Yeah.

Yeah. Well, that sounds great, Ken. I think this is really good information for our listeners out there. And I think it's important that people have a financial plan and retirement plan in place. And estate planning needs to be part of that. Medicare, Medicaid, long term care. You need to have all these things planned. planned out ahead of time. How can our listeners get a hold of you if they have questions about any of this?

Yes, if you have questions about wills versus trusts or labor deeds versus quit claim deeds, we'd be happy to help connect you with an attorney referral and get this all figured out and we'll help as much as we can. Again, our clients receive discounts if they work through us and get a referral to the attorney. So visit our website summitfc.net or give our office a call 586-226-2100. We'd love to help you protect your savings and feel confident about the road ahead.

All right. Well, that sounds great, Ken. Listeners and viewers, thanks for tuning in. That does it for today's episode of Money Talks with Summit Financial Consulting, LLC, and our host, Ken Wink. Thank you for joining us for Money Talks. Don't head into retirement without a strategy that addresses both income and taxes. For more information, please contact Ken Wink at Summit Financial, working with people you trust. Call 586-226-2100 or visit SummitFC.net. Join us again soon for another episode of Money Talks.