Lady Bird deeds, also known as Enhanced Life Estate Deeds, have become a popular estate planning tool in Michigan because they allow homeowners to transfer property directly to a beneficiary upon death while helping the estate avoid probate.
While the transfer of ownership is designed to happen seamlessly under Michigan law, it can create an important question for both current homeowners and beneficiaries: what happens to the home insurance policy when the title changes hands?
What a Minnesota Case Revealed about Insurance Risks
A 2021 Minnesota appellate case, Strope-Robinson v. State Farm Fire & Casualty Co., brought this issue into clearer focus. The case involved 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 stating 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 for Lady Bird Deed Holders 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 protections for Lady Bird deed transfers.
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
Key Considerations 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
What Michigan Homeowners Should Know
Estate planning decisions are often made with the best of intentions—to simplify matters for the family and avoid unnecessary court proceedings. But the way property is titled can also create insurance considerations that deserve attention.
For Michigan homeowners using a Lady Bird deed, a conversation with a trusted insurance advisor can help address alignment between ownership and coverage before a claim arises.
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