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Using a life estate to avoid probate

When a person has a home or other real estate in Michigan that he or she is thinking about passing on to heirs, the number of ways to do this may seem confusing, and each has its own consequences. Naming the people who will inherit the property in a will is a common approach, and trusts are also frequently used to ensure that the probate process goes smoothly. Perhaps less well known is the transfer of the home or other property through a life estate.

According to MichiganLegalAid.org, a parent could decide to transfer the title of the house to a child but continue to live in it and control the property throughout the rest of his or her life. Although the parent has complete rights to the home, the child has an interest in it, too, and automatically becomes sole owner when the parent dies. In this case, there would be no probate.

The Michigan State Tax Commission explains that the death of the grantor terminates the life estate, but the grantor could also transfer the life estate to another person. That person would not own the property, but would have the use and control of it. However, the life estate would not be terminated by the death of the holder, but by the death of the grantor. There could also be a mutual termination of the life estate by the grantor and holder.

The probate process is not the only factor affected by a life estate. Taxes and other responsibilities regarding the property may be beneficial or detrimental to the parent and child who opt for this estate plan, depending on a variety of circumstances. 

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