Estate Planning In Michigan

Archive for October 15th, 2008

Planning For Your Future is a Team Effort

Planning for clients at our firm is not done with a lone ranger approach.  We recommend to our clients that they should have a team of professionals to ensure that they meet their estate planning and financial goals.  So who should be your teammates?

As you go through your life, you may have an accountant, a banker, a financial planner, an insurance agent, as well as your family. Each of these people have a role to play in helping you make your estate planning decisions.

Your accountant or CPA will be aware of your tax situation and many of your decisions involving estate planning include issues of estate taxes. If you have a business, your accountant will be familiar with its structure and profitability, enabling you to make plans for exiting your business, either by selling it or leaving it to a family member. If living trusts are set up as part of the estate plan, your accountant will need to prepare the trust tax returns. If you give gifts to family members and others during your lifetime, your accountant may need to file gift tax returns, depending on the size of the gifts.

Your banker is familiar with the amount in your bank accounts, in whose name they are in, and whether any of the accounts have “pay on death” designations. All of this information is important when talking to your lawyer about your assets and which assets are part of your estate.

Your financial planner is the person who is informed about the rest of your monetary assets – your stocks, bonds, retirement accounts, and your children’s college funds. These assets, plus your bank accounts, are the core of the wealth that you wish to transfer to your family and loved ones.  Your financial planner needs to know what your plan will be and he/she will be the one changing the names on the accounts to your living trust or to your heirs.

Finally, if you have a spouse or children that you are supporting, then life insurance should be part of your estate plan. Life insurance provides immediate cash after you die, cash that will replace your income. If your spouse can work, and your children are grown up, then you may not need life insurance. But, if you do have life insurance, your insurance agent can be helpful in updating your beneficiary designations after you create your estate plan.

Our firm understands that each of these professionals plays an important role for your estate planning needs.  If any of these roles are not filled we can get you connected with a professional that will fit well on your team

Do-It-Yourself Wills; Simple Wills The Estate Planning Myth

With all the Suze Ormans, Nolo, LegalZooms out there you might not think it makes a difference, but a will made with software is not the same as a will created by a lawyer.

The idea that the two are similar couldn’t be more wrong. An estate planning lawyer will know the law and possible risks that software can not predict.

Banish this myth from your mind.

In this day and age there is no such thing as a simple will. No one’s life is simple.  A theme at our law firm is that “You Family is Worth It.”  Your family is worth doing the planning the right way.

Estate Planning | Your Family is Worth It

To give your family the assurance they deserve, that the fate of your estate is truly in order, an estate planning lawyer is a necessity.

EDIE the Estimator helps you with your FDIC

EDIE the Estimator

The FDIC has came out with a webpage that hels you calculate your FDIC coverage for you deposit accounts.  In this turbulent time, this type of information is key.  In addition to consulting EDIE, it is probably a good time to contact you financial adivsor, financial professional to make sure you have  a plan to weather this storm that is sending investment portfolios south.

To use EDIE, go here.

Debate Night| Obama & McCain Plus Death & Taxes

McCain & Obama Debate | Federal Estate Taxes

With the looming McCain Obama debate tonight.   I thought it would be helpful to recap what each campaign is proposing for the federal estate tax.  Luckily, the Wall Street Journal had an interesting article on this very topic today.  You can read the WSJ article here.

The way the current law works is that in 2008, the Federal Exemption is up to $2million.  Meaning there is no Federal Estate Tax for any estates under $2million.  In 2009, the number jumps up to $3.5million.  In 2010, there is an unlimited exemption.  Then 2011 and beyond, the exemption is at $1million.

Each canidate has discussed his views on where they would like the tax to go.  Here is an important quote from the WSJ article linked above.

Sen. McCain proposes raising the exemption “as soon as possible” to $5 million and cutting the top tax rate to only 15%, says Douglas Holtz-Eakin, senior policy adviser. Sen. Obama wants to keep the exemption at $3.5 million and the top rate at 45%.

Portability. Both candidates agree the exemption amount should be easily portable. “Families should not be required to undertake complex and unnecessary financial planning or be penalized for failing to take advantage of sophisticated financial strategies,” says Jason Furman, economic policy director for the Obama campaign. The Democrats’ nominee “believes we should eliminate the estate tax for 99.7% of families — and this is part of his plan to accomplish that goal,” says Mr. Furman.

Sen. McCain also favors portability. The Republican nominee “opposes situations where taxpayers may have unfavorable tax consequences” simply because they couldn’t afford — or didn’t know — “to seek sophisticated tax planning advice,” says Mr. Holtz-Eakin. “All of the costs and effort involved in such planning would be unnecessary or greatly reduced if there was portability of the estate-tax exemption. Such a proposal also meets another of John McCain’s goals of simplifying our complex tax code whenever we can.”

Under current law this year, a married couple could leave a total of $4 million to their children without federal estate tax. “But because the exemptions aren’t portable, quite a bit of planning is necessary to achieve this result,” says John M. Olivieri, a tax partner at the law firm of White & Case LLP in New York City.

Suppose a husband and wife each has $2 million. The husband dies and leaves everything to his wife. Although there’s no federal estate tax because of the marital exemption, the wife now has a $4 million estate but only a $2 million exemption, Mr. Olivieri says. Consequently, if she dies this year and leaves her $4 million to her children, “her estate will be hit with a federal estate tax of about $900,000,” based on this year’s rate structure, Mr. Olivieri says. “A similar problem arises if the entire $4 million is owned by the husband and the wife dies first.”

To avoid the problem, “many married couples expend considerable time, effort, and money to avoid wasting their combined federal exemptions,” says Mr. Olivieri. “But if the exemptions were portable, none of this would be necessary.” However, even if the exemption does become portable for federal estate-tax purposes, Mr. Olivieri points out that many people may need to take special estate-planning steps anyway because of state-tax issues.

Although many tax advisers do expect major estate-tax changes next year, no matter who wins the presidency, don’t count on them just yet. Even though the two candidates agree on portability, nobody knows how quickly such a change might happen, what the effective date might be and how the fine print of legislative language would read.

But “my sense is that portability would have bipartisan congressional support,” says Blanche Lark Christerson, managing director at Deutsche Bank Private Wealth Management in New York. “It also could simplify people’s planning and be a good thing.”

However, many people still might benefit from setting up trusts and taking other steps anyway, Ms. Christerson says. That includes many people who live in states that have “decoupled,” or separated, from the federal estate-tax system. “Also, bear in mind that even if there were no potential tax consequences and apparent need for a trust, you still might want one” for other reasons, such as protecting assets from creditors or other factors.

Valuations. This is a key issue when calculating capital-gains taxes on the sale of inherited assets. Here’s an example: Suppose your cousin dies and leaves you stock he originally purchased decades ago for $100,000 and the value of that stock has grown to $500,000 as of the date of his death. Your tax basis typically would be $500,000 — or, under certain circumstances, the value six months after the date of death. That means you don’t have to figure out what your cousin originally paid for that stock. This system is scheduled to continue through next year and undergo major changes in 2010. Critics say those changes would create additional complexity and impose unfair recordkeeping burdens on taxpayers. Advisers to both candidates have said the candidates want to retain the current system.

Michigan Estate Planning Questions to Answer

Here are some common questions that can be answered through proper Michigan Estate Planning:

1. Who will administer your estate after you pass?
2. Who will be the guardian of your minor children?
3. How will federal estate tax and other taxes be minimized?
4. How will your trust or personal representative pay any death taxes if owed?
5. How should your spouse and you hold title to assets?
6. If you cannot care for yourself, who will take care of you?
7. If you cannot manage your estate, who will do so on your behalf?
8. Who will receive the proceeds of your insurance and retirement benefits?

If these are questions that you would like to answer contact our office at (248) 865- 4700 or email at info@witzkeberry.com.

Estate Planning Mistake to Avoid!

Here is a quick tip and a common mistake I see many people make with regard to their estate planning.

Are your children on your bank accounts or deed to your house? If you are you could be doing a disservice to yourself and your children!

Holding any asset with anyone (other than a spouse) can be problematic and horrific when it’s your home.  Many well intentioned parents in an attempt to avoid probate add their children to title of their home as joint tenants.

When this happens, the question that needs to be asked is: “is it worth possibly having my house sold out from under me, while I still plan on living in it?”

By adding another person to your assets you are opening yourself up to the claims against the other, including creditors, predators and the IRS.  For example, say you child is involved in an car accident that maims another.  Well when your child is sued, YOUR house may be a countable asset if you added your child to the deed as joint tenant.

Quite the scary proposition!

Another important consideration is income tax.  Let’s look at an example.  Say parents own a $200k home.  Well, adding two children would be a $50k gift.  Years go by, the parents pass and laterthe house sells for $400k.  Well, those kids now have a basis of $50k instead of the $400k if they had inherited the property.  They are each on the hook for $150k worth of income tax owed to the IRS!  Because thay probably did not live in the house, they are also going to miss out on the $500k exemption that married couples receive for selling the home.

Estate planning is more than just preparing documents, it takes a holistic approach to an individual’s situation and an analysis of many factors.