Estate Planning In Michigan

Archive for July, 2008

Major Life Events; It’s Time To Review Your Estate Plan

Losing a job is a major life event. With the Big 3 making job cuts and Chrysler announcing today another 1,000 jobs will be lost (read here), it is important to remember that any major life events trigger a need to review your estate plan.

With job loss there can be changes in retirement accounts.  Any time there are changes in title to accounts, such as rolling a 401k from an old company into an IRA, there needs to be a review to make sure that with the new account any trusts are properly funded and any beneficiary forms are designating who they should designate. Failure to do so can lead to unintended consequences such as disinherited heirs.

Major life events (job loss, job changes, divorce) can be difficult to deal with, but it’s important to make sure that once the dust settles, everything is still in place the way it should.

Our firm has created a systematized process to review estate plans (called Foundations), similar to how you have dental check ups, to make sure your estate plan still achieves the goals you desired when you originally created it.

Living Probate

Many people, when they hear the word “probate” think of the court administration after death. However, there is another apsect of probate, called “living probate,” that deals with situations where someone is incapacitated and unable to take care of their own well being and finances. In these situations if it has not been planned for through powers of attorney, it may be necessary to establish a guardianship and conservatorship for them.

A guardian is appointed by the court, after someone requests to be appointed, to oversee the health and well-being of an individual. The guardian must, on an annual basis, file reports with the court as to the status of the incapacitated individual, ward. However, the guardian does not handle any finances or assets for the ward.

That is where the conservator comes into play. A conservator is responsible for managing the finances of the ward, this includes paying bills and investing and paying taxes. Similar to the guardian, the conservator also has to provide on an annual basis an accounting of all income, expenses and changes in the investments of the ward.

These two “agents” may or may not be the same person.

Establishing a conservatorship or guardianship can be time-consuming and expensive. To avoid these procedures, it is ideal to execute a powers of attorney prior to losing your competency, which in most situations negates the need to have a guardian or conservator appointed

Terri Shiavo Part 2?

Most people remember the Terri Shiavo situation down in Florida where there was a fight to see who would make medical decisions for an incapacitated woman. If you remember, Schiavo suffered a seizure in 1990 that left her in a persistent vegetative state, kept alive only by a feeding tube. Ms. Schiavo had no living will. Eight years later, Ms. Schiavo’s husband asked the court for permission to have the tube disconnected. Her family fought him, claiming that there was a chance for recovery. Well, there may be another similar situation happening according to the Palm Beach Post.

Karen Weber, apparently did not have a living will when she suffered a seizure in November of last year. In this case, the courts have not ruled on Ms. Weber’s condition; she is paralyzed but breathes on her own. Her husband believes that his wife did not and would not want her life prolonged artificially, but again, there is not advanced directives laying this out.

To read the story, click here.

If the Shiavo case was not lesson enough, here is another example where completing your advanced directives is a necessary estate planning step to protect your wishes and keep yourself out of the court system.

To learn more about the Shiavo cases, click here.

How to Avoid Michigan Probate

A common desire of our clients is to avoid the Michigan probate system. There are a few ways to do this, typically the most organized way is through a well funded living trust. However, there are other strategies, which are not mutually exclusive, and should be used in addition to a well funded revocable living trust. The other strategies are:

• Joint Tenancy Bank Accounts
• Pay on Death Beneficiary Designations on Bank Accounts
• Beneficiary Designations on Annuities
• Beneficiary Designations on Savings Bonds
• Beneficiary Designations on Life Insurance
• Beneficiary Designations on Pension Accounts

There are pitfalls to be wary of when using these strategies, for example you do not want to create a taxable event or open yourself up to liability of creditors and predators by sharing ownership of any accounts. These are issues we cover with our clients during our planning meetings.

Who is Watching The Child Care that is Watching Your Children

In a frightening report, according to a Michigan auditor general’s office audit as reported by the Detroit News, state oversight of child care providers was so poor that 1,900 people who were not qualified to provide the care, including sex offenders and child abusers, were not identified, nor prevented from doing so.

This is a frighting for any young families looking for child care. DHS has provided a good guide for what to look for in your child care provider. Their guide can be read here. Included in the guide are questions to ask, what to look for, how to check references, and how to stay involved.

Bank That Money?

I was having a discussion with a contact the other day regarding the failure and collapse of the IndyMac Bank. What I told him was that the FDIC insures up to $100,00 of an deposit account. Retirement accounts such as 401(k)s, IRAs, etc are typically insured up to $250,000 per person. However, it is the person’s aggregate deposits and not the individual account balances that are insured, therefore any amount over $100,00 deposited at a single bank will not be covered.

Basic Estate Planning

People are afraid of lawyers. People are afraid of death. Put them together and you have an estate planning lawyer. Many people would would rather goto the dentist then think about estate planning and what’s involved. Add to the confusion that when people hear the word “estate” they think of rich, extravagant homes in the Hamptons or in Orange County.

Estate planning is a bit of a misnomer. What it really refers to is handling your affairs during incapacity and after you pass away.

There are two major components to the services an estate planning lawyer provides. First, the counseling involved. Anyone can print of a document off the internet and fill in the blanks. Estate planning lawyers provide real value in the counseling involved in how to handle family situations, how to handle financial situations, and provides options and solutions to address estate planning needs.

The second component is preparing individualized estate planning documents, based off the counseling. Typically, if Federal Estate Taxes are not an issue there are four major sets of documents that are prepared. These are:

1. Will
2. Living Trust
3. Durable Powers of Attorney
4. Advanced Health Care Directives

The Will actus as a back-up to your trust and provides for guardianship of minor children.

The Living Trust is the “suitcase” that holds all the assets that pass to your beneficiairs and avoids the probate system.

The Durable Powers of Attorney provide instructions and nominates an individual to act as a fiduciary and interact with financial institutions if you become disabled.

The Advanced Health Care Directives nominates an individual to make medical decisions if you become incapacitated.

Incentives for The Heirs

In a recent survey, only 30% of people who have estate planning documents have outlined specific requirements that their heirs must meet to gain access to their inheritance. This is at odds with the finding that 62% of people felt strongly that each generation should take responsibility for creating it’s own wealth.

What this tells me is that people are not taking advantage of the possibilities with incentive based trusts for their children and heirs. An Incentive based trust is a nifty tool for estate planning attorneys to use that create a set of stipulations that would reward heirs for making specific life choices (and withhold inheritances for poor choices).

Some creative drafting incentives for a trust for children and heirs include:

• Encourage heirs to seek a higher education by distributing income or principle from the trust to pay tuition and supplies. Additionally, the trust could provide bonuses if a certain grade point is received.
• The trust assets could be used to match the income of an heir dollar for dollar to reward an heir for having gainful employment.
• Supplement the income for a child who works for a nonprofit or volunteers to a charitable organization
• Reward an heir for trying to start their own business.

There are many estate planning options when creating incentives in trusts for the benefit for heirs. As an estate planning lawyer working with a client, we are only limited by our creativity in drafting.

New Home

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