Land ownership is usually straight forward: Person A conveys to Person B. Person B now owns in fee simple.
There are, however, instances in which land ownership is not so straight forward, and the so-called “Lady Bird Deed” offers such instance.
In Michigan, the Lady Bird Deed is technically referred to as “The Life Estate With Power to Convey.” This post will discuss the creation and function of this estate.
The Lady Bird Deed is created in the following manner:
Grantor: Mrs. A
Grantee: Mrs. A, coupled with an absolute power to convey, sell, mortgage, or lease. If the property is not disposed of prior to her death, then to Child A and Child B, as tenants in common.
In the above example, Mrs. A conveyed to herself a life estate with power to convey. And it is truly a life estate coupled with a power to convey.
Mrs. A owns the life estate interest.
Child A and Child B own a contingent remainder interest. In property law, a contingent remainder interest is considered a present right to a future interest.
Child A and Child B’s interest is contingent on the actions of Mrs. A. If Mrs. A sells the property to a third-party, the interests of Child A and Child B are destroyed, as the contingency fails.
Conversely, if Mrs. A dies, without having sold the property, the land would vest in Child A and Child B, as the contingency has been met.
The Life Estate With Power to Convey (referred to as the Lady Bird Deed) is not so mysterious.
This tenancy affords the life estate holder free-flowing power, unencumbered by the interests of the contingent remainderman. And, practically speaking, there are only two possible results regarding this tenancy. Either the life estate holder conveys the land, destroying the interests of the remainderman, or the life estate holder dies without having conveyed, which transfers a fee simple interest to the remainderman.
The Lady Bird Deed is a contingent holding.
Dave Phillips ~ Examiner
State Street Title Agency