As her father's three marriages had produced no male heirs, he reached an agreement with the Wittelsbach emperor Louis IV in 1330 that enabled Margaret to succeed him in his Carinthian and Tyrolean estates, while Carniola would be handed over to the Habsburgs.

By the marriage, King John secured access to the Alpine mountain passes to Italy, which in turn drove the Wittelsbach emperor to break the arrangements he had made with Margaret's father.

The fact that she entered the marriage without being granted a divorce from John Henry caused a veritable scandal on the European stage and earned the couple the excommunication by Pope Clement VI.

The scholars William of Ockham and Marsilius of Padua defended this "first civil marriage" of the Middle Ages, claiming that John Henry had never consummated his matrimony.

Margaret's former brother-in-law Charles IV, elected German anti-king in opposition to Emperor Louis in 1346, campaigned in Tyrol the next year and laid siege to Tirol Castle; however, he had to pull out without success, though not without burning down the cities of Bozen and Meran out of revenge.

The countess forged a new alliance by the marriage of her son by Louis, Meinhard III, to Margaret of Habsburg, the youngest daughter of the Austrian duke Albert II.

After the sudden death of her husband Louis in 1361, her son Meinhard III succeeded his father as Duke of Upper Bavaria and Count of Tyrol.

Again facing the threat of losing her patrimony, Margaret was finally induced to contract the County of Tyrol over to her late son's brother-in-law, the Habsburg duke (and self-proclaimed "Archduke") Rudolf IV of Austria, who eventually united it with the Austrian dominions.