Best Michigan Probate Guide for Estates That Include Real Estate

When a Michigan estate includes real property — a house, a condo, a piece of land — the probate picture changes substantially. Real estate can trigger full probate even for modest estates. It can inflate the mandatory inventory fee. It can expose the home to Medicaid Estate Recovery. And it's the one asset type that most generic probate resources handle worst.

If you're searching for the right guide for an estate that includes real estate, this post explains what you need, what most resources get wrong, and which approach fits your situation.

The bottom line upfront: For estates with a house, you need a guide built specifically for Michigan that addresses the 2026 mortgage deduction rules (up to $264,000 under Public Act 1 of 2024), the small estate real property pathway, inventory fee reduction strategies, and Lady Bird Deed protections. Generic 50-state resources and outdated guides miss every one of these critical factors.

The "Homeowner's Trap" — Why Real Estate Complicates Everything

Michigan's small estate shortcut allows estates valued at $53,000 or less to bypass full probate — either through an out-of-court affidavit (PC 598) or a simple court petition (PC 556). But for years, real estate was a trap: even if the estate had almost no liquid assets, a home at market value could blow past the threshold and force a full probate.

Example of the old law: A decedent owned a home appraised at $180,000 with a $170,000 mortgage. Net equity: $10,000. Under the old rules, the $180,000 gross value pushed the estate far above the small estate limit. Full probate required. Attorney engaged. Inventory fee paid on $180,000.

Under 2026 law: Public Act 1 of 2024 (Senate Bill 129) changed this. For deaths occurring in 2026, Michigan law allows the deduction of mortgage and lien balances secured by real property — up to a maximum of $264,000 per property — when calculating whether the estate qualifies for small estate procedures.

Using the same example: $180,000 appraisal minus $170,000 mortgage = $10,000 net real property value. Add $10,000 in bank accounts. Total estate value: $20,000 — well under the $53,000 threshold. The estate qualifies for a Petition and Order for Assignment (PC 556) — no personal representative, no Letters of Authority, no four-month creditor wait.

Most guides — and nearly all national resources — haven't caught up to this change. Any guide still citing Michigan's old $15,000 or $28,000 small estate limit is working from pre-2024 law and cannot correctly advise you on the mortgage deduction.

Comparison: How Different Resources Handle Michigan Real Estate Probate

The Four Real Estate Scenarios and What Each Requires

Scenario 1: Home qualifies for small estate after mortgage deduction

Situation: Estate contains a house with a mortgage. After deducting the mortgage balance (up to $264,000), the net estate value falls at or below $53,000.

Pathway: Petition and Order for Assignment (SCAO Form PC 556) — a supervised but expedited court procedure. No personal representative appointed. No Letters of Authority. The court assigns property directly to heirs (or to whoever paid the funeral bill, up to that amount).

What you need in a guide: The exact calculation — how to apply the lien deduction, how to verify the property's current market value vs. the SEV, and how to correctly complete and file PC 556 with the county probate court.

Cost to be aware of: $25 filing fee plus inventory fee based on the net asset value (after deductions). For an estate netting $20,000, the inventory fee under the MCL 600.871 sliding scale is approximately $100.

Scenario 2: Home requires full probate — no qualifying mortgage

Situation: The home is owned free and clear, or has minimal debt, and the estate exceeds $53,000. Full probate is required.

Pathway: Informal unsupervised administration (PC 558) or formal probate (PC 559). Personal representative appointed, Letters of Authority issued, 91-day inventory filed.

Inventory fee impact: For a $250,000 home with no mortgage, the inventory fee on that asset alone (following the MCL 600.871 scale) is approximately $487.50. For a $400,000 home, it approaches $737.50. Deducting any existing liens reduces this directly.

What you need in a guide: The full SCAO form sequence, inventory fee calculation walkthrough with the real property rules, and the 45-day Property Transfer Affidavit (Form L-4260) requirement with the local assessor after the estate closes.

Scenario 3: Home was deeded via Lady Bird Deed

Situation: The decedent executed an Enhanced Life Estate Deed (Lady Bird Deed) before death, naming a remainder beneficiary.

Pathway: No probate for the home at all. The property transfers automatically to the named beneficiary upon death. The beneficiary records a certified death certificate with the county Register of Deeds (flat $30 fee in most Michigan counties) and files a Property Transfer Affidavit (L-4260) with the local assessor within 45 days.

Why this matters for Medicaid: Michigan's Estate Recovery Program (MERP) can only claim against assets that pass through the probate estate. A home transferred via Lady Bird Deed bypasses probate entirely and is fully shielded from MDHHS recovery — regardless of how much Medicaid the decedent received.

What you need in a guide: Confirmation that the deed is properly executed, the recording process at the Register of Deeds, the L-4260 requirement, and whether the transfer triggers property tax uncapping (family member transfers often qualify for a statutory exemption).

Scenario 4: Multiple heirs dispute the real estate

Situation: Heirs disagree about whether to sell, keep, or how to divide the home.

Pathway: Formal supervised probate. This requires judicial oversight, a probate judge (not just the Probate Register), and potentially a partition action if heirs cannot reach agreement.

What you need: An attorney. No guide — including the Michigan Probate Process Guide — substitutes for legal representation in disputed estate proceedings. The guide sets a firm boundary here: contested real estate disputes require professional legal counsel.

Who This Guide Is For

• Executors settling a Michigan estate that includes a home with a mortgage, where the mortgage deduction may determine whether full probate is even required
• Surviving spouses trying to protect the family home from creditor claims and Medicaid Estate Recovery
• Out-of-state executors managing a Michigan property transfer from a distance — who need the complete form sequence, fees, and deadlines mapped before engaging the county court
• First-time executors who have been told "you need to do an inventory" and have no idea how real estate values are calculated for MCL 600.871 fee purposes
• Families who suspect the decedent may have had a Lady Bird Deed and need to understand what that means for probate, taxes, and MERP exposure

Who This Guide Is NOT For

• Estates where the real property is actively contested between heirs — those require a probate attorney and potentially a partition lawsuit
• Estates with commercial real estate — multiple LLC structures, rental income complexity, or commercial mortgages require CPA and legal involvement beyond this guide's scope
• Anyone who needs legal representation — the guide provides procedural sequencing and statutory context, not legal advice

The Inventory Fee Calculation: Where Most Executors Overpay

The mandatory SCAO inventory fee (MCL 600.871) is calculated on the gross value of probate assets — which for many estates, the biggest number is the house. The fee operates on a sliding scale:

• $50,000–$99,999.99 estate: $237.50 + 0.25% of amount over $50,000
• $100,000–$500,000 estate: $362.50 + 0.125% of amount over $100,000

Before 2013, Michigan courts required the inventory fee to be calculated on the gross market value of real property — no mortgage deductions. A subsequent legislative correction to MCL 600.871 explicitly permits deduction of secured loan balances from real property values when calculating this fee.

The constraint: You cannot deduct a mortgage to below zero. Underwater properties count as zero, not a negative number. And negative equity on one property cannot offset positive values on other estate assets.

Example: Estate contains a $300,000 home with a $220,000 mortgage and $30,000 in bank accounts. Net real estate value for fee purposes: $80,000. Total estate: $110,000. Inventory fee: approximately $425. Without the mortgage deduction, the gross estate would be $330,000, and the fee would be approximately $662.50 — a $237.50 difference paid directly to the court.

Most executors overpay this fee because nobody explains the deduction. The Michigan Probate Process Guide walks through the calculation in detail, with worked examples.

Tradeoffs: When a Guide Isn't Enough

Be honest about when professional help is required:

• The mortgage deduction calculation is disputed: If the county court challenges your property valuation or lien deduction calculation, you'll need an attorney to defend the numbers
• The estate is close to the $53,000 threshold: If the net estate value is within $2,000–$3,000 of the limit, a contested valuation can shift you from a $25 petition into a full probate — having an attorney calculate the exact numbers reduces that risk
• Medicaid Estate Recovery sends a claim: MDHHS recovery claims require careful prioritization of statutory allowances. A guide explains the framework; an elder law attorney defends against it
• Multiple properties with complex mortgages: The guide covers the single-home scenario well. Multiple properties, reverse mortgages, or home equity lines of credit with variable balances add complexity that may benefit from CPA involvement

FAQ

Can you use a small estate shortcut if the house is the only asset? Yes, if the estate qualifies. In 2026, if the home's value after deducting the mortgage balance (up to $264,000) is at or below $53,000 — and other non-exempt personal property doesn't exceed $3,000 — the estate qualifies for a Petition and Order for Assignment (PC 556). This requires a court filing but no personal representative appointment.

Does a Lady Bird Deed still require probate for the house? No. A properly executed Lady Bird Deed transfers the home outside of probate entirely. The beneficiary records a death certificate with the county Register of Deeds ($30 flat fee in most Michigan counties) and files a Property Transfer Affidavit with the local assessor within 45 days. The house never enters the probate estate.

How is real estate valued for the Michigan inventory fee? As of the date of death, not current market value. Acceptable methods include two times the State Equalized Value (SEV) shown on the property tax bill, or a formal appraisal. The mortgage balance (up to the property's gross value — not below zero) is then deducted for fee calculation purposes.

Can Medicaid take the house if it goes through probate? Michigan MDHHS can file a MERP claim against probate assets for Medicaid long-term care costs paid after the decedent's age 55. MERP can claim against a home that goes through probate. The claim is deferred while a surviving spouse or dependent child lives in the home. Assets transferred via Lady Bird Deed before death are fully shielded.

Does a surviving spouse automatically get to keep the house? Not automatically, but significant protections apply. The $30,000 Homestead Allowance under MCL 700.2402 is paid to the surviving spouse before unsecured creditors. The Family Allowance covers ongoing maintenance during the administration period. And MERP claims are deferred during the surviving spouse's lifetime. The guide explains how to claim all three allowances in the correct priority order.

The Michigan Probate Process Guide covers every real estate scenario in detail — the mortgage deduction calculation, the PC 556 pathway for real property small estates, Lady Bird Deed transfers, the inventory fee walkthrough, and Medicaid Estate Recovery defense. Download the free Quick-Start Checklist to triage your estate's pathway first.

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