Michigan Court of Appeals Holds Life Estate Holder Is A Property Owner Under Principal Resident Exemption In MCL 211.7cc

On April 8th, 2014, the Michigan Court of Appeals held that a life estate holder is considered an owner of property for purposes of the principal resident exemption under MCL 211.7cc

In Helen Flowers v. Township of Bedford, Docket No. 314125, the Michigan Court of Appeals addressed an appeal from a Michigan Tax Tribunal decision that claimed that Helen Flowers, the holder of a life estate in real property located in Bedford Township, Michigan, was not entitled to claim the Principal Residence Exemption (PRE) because she was not an "owner" of the property as described in MCL 211.7cc.

In holding that Ms. Flowers was indeed entitled to the PRE, the Court began with a brief history of the case.

Petitioner’s husband, Richard, owned a home before he and petitioner married. Richard passed away in August 2011. His will provided petitioner with a life estate in the home, and provided his children with a future interest in the home. A deed granting petitioner’s life estate was drafted on January 16, 2012. Respondent denied petitioner’s request for a PRE for the property. Petitioner appealed, and a hearing referee determined that petitioner is an owner of the property under MCL 211.7dd(a)(v) and therefore entitled to the exemption. Respondent filed exceptions to the referee’s findings. The tribunal determined that petitioner is not an owner under MCL 211.7dd(a)(v) because she was not a prior owner before the transfer and, therefore, that she is not entitled to the exemption."

The Court futher stated

[t]his Court has many times held that a person does not have to own property in fee simple to claim a homestead. The word "owner" as used in the law has generally been treated as including all parties who had a claim or interest in the property, although the same might be an undivided one or fall short of an absolute ownership, and possession alone has frequently been held, in reference to personal property, as prima facie evidence of ownership.

A life estate gives the holder the right to possess, control, and enjoy the property during the holder’s lifetime. Wengel v Wengel, 270 Mich App 86, 99; 714 NW2d 371 (2006). Accordingly, we conclude that the holder of a life estate has an interest in the property and is considered an [']owner.['] Therefore, petitioner is entitled to the PRE because she is a partial owner, along with Richard’s children, under MCL 211.7dd(a)(ii). Further, petitioner is also an owner under MCL 211.7dd(a)(iii) because she [']owns property as a result of being a beneficiary of a will or trust or as a result of intestate succession.['] The tax tribunal erred in applying the law or adopted a wrong principle when it determined petitioner was not an owner under MCL 211.7dd(a). Michigan Bell Tel Co, 445 Mich at 476.