Attorney & Mediator
Attorney & Mediator

Property Taxes – New in Michigan

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Michigan Property Taxes

In Michigan, the value of your real property is assessed by the local municipal assessor.  This State Equalized Value is 50% of the value of the property.

Prior to 1994, the taxable value of your property went up and down on a yearly basis depending upon the increase or decrease in value of the home and/or the neighborhood.

The biggest problem was created for individuals who held their property for many years. While their property remained as is, others near-by could build new homes or greatly remodel the home so that the value of the neighborhood went up dramatically.  This was especially true with waterfront homes.  In more underdeveloped areas, cottages were eventually replaced with very large homes.  As the values around the lake went skyrocketing, so too did the tax bill for the small cottage that remained unchanged.  Many individuals were faced with selling the property because they could no longer afford the property taxes.

In 1994, the voters of Michigan approved Proposal “A”.  This capped the amount that property taxes could increase on an annual basis.  Therefore, the property tax upon a parcel of real property cannot increase more than 5% per year.

This leads to two separate values for a parcel of real estate:  the state equalized value (actual value) and the taxable value.  For parcels held on a very long term basis, the difference between the two values can be dramatic.

The property taxes are uncapped (or pop-up) upon the sale or transfer of the property by the owners.  This included the transfer of property by gift or at death to children or siblings.

Often long held farms or family cottages which the owners wanted to pass down to their children had to be sold after the children found an increase in taxes of up to three or four times what their parents had been paying.

Effective December 31, 2013, this has changed.  Now, the transfer of property by the original owners to individuals who are children, parents or siblings, will not uncap the property taxes.

Medicaid Estate Recovery – Things have changed in Michigan

For a long time, the state of Michigan resisted the federal mandate to recover medicaid costs from the estates of those individuals when they died.

Effective July 1, 2011, Michigan began it’s recovery program.

How does it work? Medicaid beneficiaries who are age 55 or older and who have received long term care services after September 30, 2007, are now subject to estate recovery. Since people who qualify for Medicaid have less than $2,000.00 in assets, but, they may have a home. Therefore, estate recovery is really aimed at recovering Medicaid dollars from the equity in the house after the recipient dies.

From everyone who has a home? Not necessarily. Right now, estate recovery only applies to property passing through the probate estate of the deceased Medicaid recipient. Therefore, if the home can by-pass probate court, it will not be subject to recovery.

How can this work? By having the home (and other assets) transfer to the beneficiaries immediately upon the death of the owner without a need to go to probate court. This can be done by beneficiary designations and “Ladybird deeds” .

What is a Ladybird deed? It is a deed where the owner transfers his/her property to the beneficiaries during his/her lifetime, however, the owner holds back a life estate in the property and the right to sell. Therefore, the beneficiaries don’t really get title to the property until the owner dies.

Can this be done if the property owner is in a nursing home? Yes. If they are able to sign, they can sign the deed. If they are unable to sign, an individual acting under a Durable Power of Attorney may be able to sign for them. If that is not possible, the family can go to Probate Court and obtain a Protective Order.

Won’t these steps cost the family money? Yes, however, it is far less than would be lost if the home went into the deceased individual’s probate estate and his/her Medicaid costs are deducted from the value of the home.

Medicaid recovery can be eliminated or minimized using the proper legal tools.