Streamlining Estate Planning for Michigan Rental Properties: The Role of Lady Bird Deeds

As a real estate investor in Michigan, you may hold rental properties in your personal name for simplicity and tax advantages. We advise the better approach is holding property in an LLC, yet many investors still do hold real estate in their own names.  Estate planning for these assets can feel overwhelming especially when probate looms large, potentially delaying income streams and tying up your heirs in costly court proceedings. Enter the Lady Bird Deed (also known as an enhanced life estate deed), a powerful yet underutilized tool that allows you to maintain full control over your rental property during your lifetime while ensuring seamless transfer to beneficiaries upon your death, all without probate.

What Is a Lady Bird Deed and How Does It Work for Rental Real Estate?

A Lady Bird Deed divides ownership into two parts: a life estate (your retained interest) and a remainder interest (transferred to your named beneficiaries or trust). Unlike a traditional life estate deed, the “enhanced” feature gives you unrestricted rights as the grantor. You can continue collecting rent, refinancing for improvements, or even selling the property outright without needing beneficiary approval. For a rental held in your name, this means uninterrupted cash flow and management flexibility.  A Lady Bird Deed is revocable, so you can update beneficiaries anytime by filing a new deed. Upon your passing, the property automatically vests in the beneficiaries, bypassing probate entirely.  We recently had a client who lived in Michigan and passed away and held property in Michigan and Florida.  Because he did not have the Florida property as part of his estate plan, that property required probate to be opened in Michigan and Florida.  Opening the Florida probate case could have been avoided with a simple Lady Bird Deed (or other planning tools).

Lady Bird Deeds shine for investment real estate in Michigan, offering targeted benefits:

Probate Avoidance: Michigan probate can take 6-12 months and cost 1-3% of the estate’s value in fees. For a $300,000 rental, that’s $3,000-$9,000 saved, plus faster access for heirs to manage or sell the asset.

Retained Control and Income: Lease to tenants, raise rents, or deduct depreciation on your taxes as usual. No beneficiary interference means your business decisions stay yours.

Tax Efficiency: No immediate gift tax trigger since the transfer occurs at death. Beneficiaries get a step-up in basis to fair market value, minimizing capital gains on future sales.

Compared to a revocable living trust (which costs $1,500-$5,000 to set up), a Lady Bird Deed is far simpler and cheaper—often under $500 including recording fees.

No tool is perfect, especially for rentals. For Michigan landlords with rentals in their personal name, a Lady Bird Deed offers a low-cost, high-control path to probate-free succession preserving your legacy without disrupting operations. It’s not a one-size-fits-all, though; if your estate includes diverse assets or complex family dynamics, integrate it into a broader plan. As always, if your considering estate planning regarding your rentals, don’t go it alone.  Contact me for consultation to review your situation.