Estate Planning In Michigan

Archive for the ‘Living Trusts’ Category

Tuesday Topic | When To Update Your Estate Plan in Michigan

Every Tuesday I have a meeting with other business people in the area and we each talk a few minutes about our practice.  As a Michigan estate planning lawyer I talked about the need to review your estate plan.  I was asked a question about how often to review your estate plan the night before as well.

What I told the group was that our firm believes in annual reviews of your estate plan.  We care very much about our clients and the hard work that was put into thier estate plan, we do not want their plan to fail due to a lack of maintenance.

Setting up an estate plan is not a “one-and-done” propostion.  Just like going to the dentist, an estate plan needs at least annual check ups.  Occasionally like a dentist there will be major work, such as an amendment to the plan.  But as a whole, only a few tune ups each year.

The reason for the need for check-ups is threefold.

1. Your family situation may change.  There may be a new child to plan for, a divorce, marriage, etc.
2. Your assets may change.  Have you added new bank accounts, bought a new house, new life insurance, etc?
3. The laws change.  There have been many changes to both Michigan and Federal law in the past 10 years alone that effect estate planning.  With the new administration there is bound to be new Federal Estate tax laws as well.

So, have you updated your estate plan?  If you have an estate plan with another attorney, have they cared enough to contact you?

Quicken Will Maker Software

David Goldman, a Jacksonville estate planning attorney, and the author of the Florida Estate Planning Lawyer Blog, wrote a great article on his thoughts regarding Quicken Software to prepare your estate plan titled Using Quicken to prepare a trust: The good, the bad, and the ugly! You can read his article here:

http://www.floridaestateplanninglawyerblog.com/2008/10/using_quicken_to_prepare_a_tru.html

He really makes some great points.  This same analysis can be applied to any of the Do-it-yourself estate planning software, such as Suze Orman or any others.  In conclusion David writes:

There are many mistakes in the Quicken documents, most disturbing might be some of the things that are not included in a Quicken trust. Quicken gives none of the flexibility to a trust that make it useful for the common person. A trustee under a Quicken trust could not do anything without creating liability to a beneficiary because by default they must act as a prudent trustee. If you have a trust created by Quicken 2009, 2008, 2007 or a previous version, you should have it reviewed by an estate planning lawyer.

Should My House Go into My Trust in Michigan?

A common question clients have is whether they should put their house into their revocable living trust in Michigan.  Like most questions, my answer is “it depends.”  This is where estate planning becomes more than just preparing documents or using software such as Willmaker, Quicken, or Suze Orman.  There is actually counseling involved based on the situation.

is the client single or married.  Do you want to destroy the tenancy by the entirety, where Michigan has afforded certain benefits?  Is the goal to avoid probate?  What about estate recover, does that have an effect?  Unfortunately, there are a few factors to consider when making this decision.

Fortunately, a quality Michigan estate planning lawyer will be able to walk you through the scenerios to decide upon the best answer in your situation.

The Problem With Michigan Trust Mills

A financial planner friend of mine had me review an estate plan of a couple the other day.  This couple had their estate plan done by one of the many “trust mills” in Michigan.

By trust mill, i mean a set up where they only meet their attorney once (if at all), and there is little to no customization done for an individuals estate plan.  In other words, it is just a fill in the blank estate plan.

Typically, people are put into one of these “estate plans” by unreputable financial professionals who will tell potential clients that they can have a trust based estate plan with unlimited revisions for a set price.  One way they do this is offer an “Estate Planning Seminar” where they will have an example trust in a pretty binder, then tell everyone they can have their plan done for a set fee, say $2250.  This epitomizes a one-size fits all approach to estate planning, that doesn’t take into account the actual needs of the client.  Typically, salesman use this trust as a loss leader to sell clients annuities.

As an estate planning attorney who actually values his clients, there is no way i would be able to quote a fee with out knowing exactly what the clients goals are and how complex it will be to meet those goals.

Back to the couple I met with.  In addition to the usual problems with trust mill prepared plans, they also had three very important issues that I raised with them.

First, as a married couple, their residence was funded into the trust.  In Michigan, we have what is called tenancy-in-the-entireties, which is a special designation created by the state for real property.  This status gives married couples added benefits against creditors, predators, the IRS, and lawsuits.  Well, someone, either the financial professional or attorney, told the clients to fund the residence into the trust, thereby destroying the added protection the couple had as married couples.

Second, the couple both had what is called “springing” powers of attorney.  This is a counseling question to determine the type of financial power of attorney to use.  After counseling the clients, they realized that they were in the wrong type of financial power of attorney.  Luckily, they have not yet had to rely on it.

Third, their healthcare directives were out of date and not valid.  This attorney who prepared their documents promised to stay in touch every year to review their estate plan (which is supposed to be free, including amendments).  Well the attorney never did.  So, I pointed out the changes necessary to bring the healthcare directives up to date.  Our firm has a systematized membership program called Foundations that clients can opt into that will maintain their plan through the years.

The good news, the couple was able to see the mistakes and correct them before they had to rely on the faulty documents.  The bad news, the couple is going back to the original attorney to have the documents corrected, since they have free changes for life.

You get what you pay for…

Michigan Probate; Problems

Currently our office is probating the estate for a personal representative who is outside the state of Michigan.  The client has already expressed her dismay at the probate system before we even began the process.  Our office tries to make the administration and probate process as easy as possible on our clients.  But we cannot change the fact that it is time consuming, stressful, and puts both our firm and clients at the mercy of the Michigan courts.

There is a better way, and it is through using a living trust based estate plan to avoid the whole probate process.  The personal representative in this situation would have had a much easier, quicker and less stressful experiance if the deceased had opted for a trust based plan instead of a will based estate plan.  Remember, a will does not avoid the probate process, but instead is a ticket to the probate process.

Want to Avoid Probate? A Will is Not The Answer!

As my office prepares to probate another Michigan estate of a client’s relative (who had used another attorney to prepare the documents), I am again reminded of a huge myth that many people still believe.  They believe that a will avoids the probate process.

A WILL DOES NOT AVIOD PROBATE; A WILL IS YOUR TICKET TO THE PROBATE SYSTEM.

A properly funded revocable living trust avoids probate.  Operation of law due to the status of title avoids probate.  A will does not avoid probate.  It can make the probate process go smoother, but still, you have to go through the probate process.

FDIC Updates Revocable Trust Rules

Using a revocable living trust is a common estate planning tool. On September 26th, 2008 the Federal Deposit Insurance Corporation (FDIC) updated their deposit insurance regulations regarding revocable trust accounts. This interim rule can be summarized as follows:

The FDIC is adopting an interim rule to simplify and modernize its deposit insurance rules for revocable trust accounts. The FDIC’s main goal in implementing these revisions is to make the rules easier to understand and apply, without decreasing coverage currently available for revocable trust account owners. The FDIC believes that the interim rule will result in faster deposit insurance determinations after depository institution closings and will help improve public confidence in the banking system. The interim rule eliminates the concept of qualifying beneficiaries. Also, for account owners with revocable trust accounts totaling no more than $500,000, coverage will be determined without regard to the beneficial interest of each beneficiary in the trust.

If you have any questions on how this effects your accounts or estate planning documents, please contact our office at (248) 865-4700. For the rest of the update you can go here: http://www.fdic.gov/regulations/laws/federal/2008/08sep26rule.html

Five Legal Tips for Peace of Mind

A colleague of mine from Virginia, who is a member of one the associations I belong to was a guest blogger for the blog Zenhabits.  He wrote a great post entitled the 5 Legal Tips for Peace of Mind.  The first in his list was “Execute a Will.”  As an attorney who only focuses on estate & business planning, I would change that to “Execute a Will or Trust based Estate Plan.”  Still good information and a good quick read.

You can read his post here: http://zenhabits.net/2008/09/5-legal-tips-for-peace-of-mind/

Who Should You Choose as Trustee or Personal Representative?

Regardless if you choose a trust based estate plan or a will based plan, you need to choose someone to operate as a trustee or personal representative of your estate and assets. This person plays a critical role in the administration of your estate, such as making certain tax elections and keeping records of the accounts.

Choosing a personal representative or trustee in Michigan is a tough decision. The person or institution you choose must have demonstrated integrity, diligence, capacity and ability to act as well as the ability to remain loyal even where there may be conflicts of interest.

A trustee or personal representative wields a great amount of power. One solution and safeguard to their abuse of power is to build in what is called a “trust protector,” or someone who has the ability to remove a trustee or personal representative and appoint someone else.

Watch Out for Michigan Living Trust Scams!

I cannot stress this enough. I know of but will not name financial groups who hire sales people to market one-size fits all “living trusts” with paid sales people who use high pressure tactics to try to push this “plan” on seniors. Often, there is not attorney present. They will charge one price, I know one group that charges $2,250 for their “plan.” They will market these “plans” to seniors and retirees through seminars where they provide the food. They use this as an in to try to sell annuities. Often times the attorney will not even meet with the client. In addition to their high pressures seminars, they flood the market with advertising, even going as far as to put out a sham newspaper geared towards seniors.

Be careful if you are attending a seminar on estate planning and their is no practicing attorney there, only financial “professionals” and salespeople. They may say “the attorney is so busy” that’s why he is not attending.

All I will add is what Mike Cox, the Michigan Attorney General has posted on the Michigan.gov site.

Living Trusts

Beware of “One-Size-Fits-All” Estate Plans

A revocable living trust can be an important tool in estate planning for many people. A revocable living trust is a trust instrument that may be changed during the lifetime of its grantor, the person who sets up the trust. It is called a “living trust” because the maker is alive, in contrast to a testamentary trust, which is not effective until after the death of its maker. By itself, the living trust instrument is probably a legal document. However, a subject as important as estate planning should be discussed with trusted professional counsel, including your attorney and financial planner.

In recent years, several for-profit companies have begun marketing living trusts over the telephone, by postcard, by in home sales pitches, and in regional meetings, often held at restaurants or in hotel conference rooms or even senior centers and public libraries. Likely targets of the promotional marketing are senior citizens. The one-size-fits-all trust forms being sold at these events vary greatly in quality and may not be appropriate for your individual estate planning needs. Contrary to some sales pitches, not everyone benefits from a living trust.

Sometimes customers pay exorbitant fees for these trusts. A typical charge by one of the trust kit companies is $1,995.00 per trust. Trained salespersons may exaggerate consequences of failing to buy their products, or may employ high pressure tactics to close a sale and not disclose that the thick, expensive-looking finished document is only a living trust “kit.” (A “kit” is a prepackaged, standardized form document—it is not tailored for the customer’s particular circumstances.) The following tips can help consumers in making a wise decision before purchasing a living trust:

1. Consumers should be wary of salespersons who call on the telephone, send a postcard, or appear at the doorway offering living trusts.

2. Do not be pressured into purchasing a trust based on a phone call, or the in-home sales pitch of a salesman, or immediately following a seminar. Before making any purchase decision, consult with a reliable professional with the necessary background to help you decide what estate plan is best for your individual situation, rather than relying on someone whose primary interest is a sales commission.

3. Before buying a living trust from a stranger, call a local lawyer and ask him/her what they charge for preparing trusts. Often the kit price is two or three times greater than what a local lawyer would charge. Those selling trust kits rely on the public’s apprehension that attorneys are costly.

4. If you already have a lawyer, discuss the trust kit offer with him or her before buying.

5. Be wary if a trust salesperson promises specific results or dollar savings. Costs of probate and attorney fees vary greatly from state to state, and according to personal circumstances.

6. If the trust salesperson promises a lawyer will review the customer’s documents, demand the name of the lawyer and check with the State Bar of Michigan to make certain the lawyer is licensed to practice in Michigan.

7. If the salesperson says that his or her company or the living trust being sold is recommended or endorsed by AARP, do not buy! AARP does not endorse or recommend any living trust product at this time.

8. Do not give personal and confidential family and financial information to a salesperson, even if the salesperson promises it will be passed on to a licensed lawyer. Meet with or discuss the matter with the lawyer personally.

9. Watch out for companies that sell trusts and also try to sell annuities or other investments. Under the guise of setting up a living trust, financial information may be disclosed to sales agents who earn high commissions by “moving” existing investments into others being sold by the living trust company.

10. If the salesperson says part of the trust cost will pay the lawyer’s fee, do not buy! A lawyer may not split a fee with the salesperson or with the trust company.

11. Discuss whether you can get your money back if you are not satisfied, and get the promise in writing.

12. If you encounter problems later, first contact the company or the lawyer and ask for a refund.

You can read this consumer alert at: http://www.michigan.gov/ag/0,1607,7-164-34739_20942-44727–,00.html