In Michigan, Lady Bird deeds, also known as Enhanced Life Estate Deeds, have become a popular estate planning tool. They allow homeowners to name a beneficiary who automatically receives the property upon death, bypassing probate entirely.
While the deed transfers ownership seamlessly under Michigan law, it raises an important question for both current homeowners and their beneficiaries: What happens to your homeowners insurance when the title changes immediately upon death?
The Minnesota Case
This issue came into focus in Strope-Robinson v. State Farm Fire & Casualty Co., a 2021 appellate decision out of Minnesota involving a Transfer on Death Deed (TODD), which functions similarly to Michigan’s Lady Bird deed.
Here’s what happened:
- A homeowner signed and recorded a deed providing that his house would transfer immediately to his niece upon his death.
- He passed away. Six days later, his ex-spouse set the home on fire.
- As the new owner, the niece filed a claim under his homeowners policy for the fire damage.
- State Farm Fire & Casualty Co. denied the claim because she was not listed as a named insured on the policy.
- The court agreed. It ruled that the insurance contract was only between State Farm and the uncle. Because ownership had already transferred at death, his estate no longer had an insurable interest in the home at the time of the fire, and the niece had no rights under the policy.
In other words, even though she owned the house, she was not insured for the loss.
What This Means in Michigan
This case highlights a notable distinction: deeds control ownership, while insurance policies control coverage. An insurance policy is a personal contract between the insurer and the named insured. It does not automatically transfer when property ownership changes.
Following the court’s decision, Minnesota enacted legislation providing a 30-day temporary continuation of coverage in certain transfer-on-death situations. As of this writing, Michigan has not adopted similar legislation for homes under a Lady Bird deed.
In Michigan, post-death coverage depends primarily on:
- The specific wording of the homeowners policy.
- How the insurance carrier handles ownership changes at death.
Because policy language varies, coverage should not be assumed. As Jared Burkhart, CEO of Big I Michigan, explains:
“We encourage homeowners to work closely with their insurance agent to understand their individual situation and how their policy would respond.” — Jared Burkhart, CEO, Big I Michigan
Practical Steps for Michigan Homeowners
If you have, or are planning to use, a Lady Bird deed, the following steps are worth considering:
- Notify your insurance agent about the existence of a Lady Bird deed and identify your named beneficiary.
- Ask the insurer if the beneficiary can be added to your policy under the appropriate additional insured language.
- Review the policy language addressing the death of the named insured and who qualifies as an insured afterward.
- Prepare your beneficiary in advance so they understand what steps to take with the insurance carrier upon your death.
As Mike McBride, Partner of KAP Mason-McBride, explains:
“Most homeowners assume coverage automatically follows the property, but insurance policies are contracts that respond based on specific terms and conditions between the parties to the contract. Those considerations are best addressed in advance — not after a loss.” — Mike McBride, Partner, KAP Mason-McBride
The Takeaway
Estate planning decisions are often made with the best of intentions — to simplify matters for the family and avoid unnecessary court proceedings. But how property is titled can carry practical insurance implications that deserve equal attention.
For Michigan homeowners using a Lady Bird deed, a conversation with a trusted insurance advisor can help ensure alignment between ownership and coverage before a claim arises.
