Which Michigan Relatives Can Inherit a House Without Uncapping

By Kelly M. Neumann, a Michigan estate planning attorney and Principal Attorney at Neumann Law Group. Last updated July 21, 2026.

Michigan caps the growth of a property’s taxable value while the same owner holds it and lifts that cap when ownership transfers. The exemption that lets a family home pass to the next generation without that reset is often described loosely, and the loose description leaves out the two conditions the statute actually imposes and the list of relatives it actually names.

The provision is MCL 211.27a(7)(u). Beginning December 31, 2014, a transfer of residential real property is not a transfer of ownership where the transferee is the transferor’s or the transferor’s spouse’s mother, father, brother, sister, son, daughter, adopted son, adopted daughter, grandson, or granddaughter, and the residential real property is not used for any commercial purpose following the conveyance.

The List Is Closed, and It Runs Through the Spouse

The relatives are named, and the names are the whole list. Parents, siblings, children, adopted children, and grandchildren qualify. A niece, a nephew, an aunt, a cousin, or a great-grandchild does not, and a transfer to any of them uncaps the property whatever the family’s intent.

The list runs through the transferor’s spouse as well as the transferor. A transfer to a stepchild, a brother-in-law, or a father-in-law fits the exemption because the statute reaches the transferor’s spouse’s son, brother, or father. That extension is easy to miss and it materially widens who can take a house under the cap.

An earlier version of the exemption, in subdivision (t), applied only from December 31, 2013 through December 30, 2014 and reached only relatives related by blood or affinity to the first degree. Material written against that version describes a narrower rule than the one that has governed since. Our Michigan estate planning attorneys work from the current subdivision.

Two Conditions, One Proof Period, One Fine

The second condition is use. The residential real property must not be used for any commercial purpose following the conveyance. A child who inherits a house under the cap and then rents it out has changed the use the exemption depends on, and the assessor is entitled to treat the transfer accordingly.

The statute then supplies a verification mechanism rather than a filing deadline. On request by the Department of Treasury or the assessor, the transferee must furnish proof within 30 days that the requirements of the subdivision are met. A transferee who fails to comply with that request is subject to a fine of $200.

That is a different obligation from the property transfer affidavit that every transferee owes under subsection (10), which must reach the local assessing office within 45 days of a transfer of ownership on a form stating the parties, the date, the consideration, and the parcel. The affidavit is filed whether or not an exemption is claimed. The 30-day proof is furnished only when someone asks for it.

Where a Retained Life Estate Fits

A separate subdivision addresses the family that keeps the parent on the deed for life. Under MCL 211.27a(7)(d), beginning December 31, 2014, a transfer of that portion of residential real property that had been subject to a life estate or life lease retained by the transferor, resulting from the expiration or termination of that life estate, is not a transfer of ownership where the transferee is one of the same listed relatives and the property is not used for any commercial purpose afterward.

The provision matters because a retained life estate is exactly what a Lady Bird deed creates. The remainder interest passing at the parent’s death is the transfer this subdivision exempts, on the same relative list and the same use condition, with the same 30-day proof and $200 fine.

Without that subdivision the end of a life estate would be a transfer like any other. With it, a deed that keeps the parent in control for life and passes the house to a child at death does so under the cap.

A Trust or Entity Has Its Own Rules

The relative list appears again inside the subdivisions governing trusts and estates, with the same December 31, 2014 start. A conveyance of residential real property to a trust is exempt where the sole present beneficiary or beneficiaries are on the list. A distribution out of a trust to a listed relative is exempt. A change of beneficiary that adds or substitutes a listed relative is exempt. And a distribution from a decedent’s estate to a listed relative is exempt. In each case the non-commercial use condition applies.

Holding the property in a company is treated differently. Under subdivision (h), a conveyance of more than 50 percent of the ownership interest in a corporation, partnership, limited liability company, or other legal entity is itself a transfer of ownership of the property the entity holds, and the entity must notify the assessor within 45 days unless the transferee already has. There is no relative exemption inside subdivision (h).

The exemption letter is the first thing to check on any deed or trust distribution to a family member, because the conditions differ by subdivision and an assessor reads the one that applies. One call is usually enough for us to tell you where things stand. Call us at (800) 525-6386.

Before Recording a Transfer to a Relative

Which subdivision governs, who is on the list, and what the property will be used for afterward are the three questions that decide whether the cap survives, and all three can be answered before anything is recorded. We prepare deeds and trust transfers at Neumann Law Group for families across Northern Michigan and statewide, including Lady Bird deeds that rely on the life-estate subdivision. We are glad to talk through any of these questions. Call (800) 525-6386 or send us a message and we will get back to you.