A "ladybird deed" is a type of deed (Quit Claim or Warranty) in which the maker retains a life estate in the property being conveyed (i.e. the right to continuing living there until death), and retains the right to change the remainder interest (i.e. who gets it when the maker dies). Thus, it is easiest to think of it a having the same effect as a beneficiary designation on real estate.
It has primarily been used in the past as a Medicaid planning device, but is being used more frequently as an estate planning tool.
If a client is not going to have a trust, it is a way to transfer your real estate at the time of your death, and thereby avoid probate. If client has a trust, using a ladybird deed for the client's home still qualifies the home as an exempt asset for Medicaid purposes, but avoids probate by having the home go to the trust when the client dies. This, also, avoids the home being subject to Michigan's Medicaid Recovery Law, under which the State is to go after your probate estate when you die in order to recover assets to re-pay the Medicaid that was paid on your behalf.
Thus, the ladybird deed avoids probate and Michigan's Medicaid Recovery Law.
