Like in the books; In my AU, Henry builds an animatronic replacement of Lottie. Completely done in secret, she's completed about a year after Lottie initially went missing.
The animatronic is finished just after William also disappears.
Basically, Michael starts living with Henry after Will disappears, as he has nowhere else to go. I'm pretty sure he's legally old enough to live on his own at this point but Hen would feel guilty if something happened to him so....
But whatever. Mike is none the wiser that Lottie isn't real. Or like... Idk... I have the feeling he knows and ignores it for Henry's sake.
Eventually I'll write up something of The Puppet and Lottie-Bot meeting, give her some existential issues. For now though this is all I've got. Or something!!