Does recording a ladybird deed uncap my property taxes?

Per the Michigan State Tax Commission, the creation and recording of ladybird deeds should be treated as life estates. Creation and recording of a ladybird deed will not uncap the property taxes immediately upon filing, but the Ladybird deed uncaps the property taxes when the granter dies. For purposes of this answer, to uncap the property taxes means that the taxable value of the subject property becomes the same as the state equalized value.

Pursuant to MCL 211.27a(7)(c) a transfer of that portion of real property subject to a life estate or life lease retained by the transferor does not uncap the property, until expiration or termination of the life estate or life lease.

Here is an example: June Cleaver Ladybird deeds her Lake Saint Clair mansion located in Macomb County to her son, Wally Cleaver, retaining a life estate in 2013. June Cleaver dies in April of 2014. The Michigan State Tax Commission says the Lake Saint Clair mansion property taxes are uncapped following the death of June Cleaver in 2014.

This interpretation may seem contrary to the new amendment to the uncapping provisions. However, recent communication with the Michigan State Tax Commission has verified this example and the uncapping of the property tax assessment would apply to a ladybird deed in this situation. Further, the it was specifically stated that the uncapping will apply even considering under the recent amendments that occurred in January of 2015.

The Michigan State Tax Commission’s opinion on a ladybird deed uncap of the property tax assessment argues that MCL 211a(7)(t) (this is the recent amendment mentioned above known as the “new immediate family exception”) shall not apply when immediate family member gets title to property on death of parent who held life estate. Further the property tax assessment is uncapped pursuant to MCL 211.27 a(7)(c) (termination of life estate) as (7)(c) because this the “most specific provision” that applies under the circumstances.