Estate Planning In Michigan

Archive for the ‘Personal Reflections’ Category

Estate Planning Weekend Round Up

Here are some of last weeks estate planning news across the internet.

• The Modesto Bee had an article by Valentine Sabuco with the title “Is it time to get your estate planning house in order?”.  In the article she states “that estate planning is a very importnat component of everyone’s financial planning, regardless of the size of the estate.”  I could not agree more with her.  Read the rest of the article here: http://www.modbee.com/business/story/484500.html
• Michael E. Andrews wrote an article for Northindystar.com entitled “Estate plan safeguards assets, loved ones.”  In the article he lists six quality reason why you should have an estate plan.  Many of these have been covered on this blog already.  You can read his article here.
• Troy Neff wrote a good article in the Toledo Free Press entitled “Don’t Try this at Home”.  In the article Mr. Neff tells the story of a client who as a “do-it-yourselfer” and prepared his estate planning documents with a software package, without a lawyer.  Well, when it was all said in done, the client’s plan was fraught with issues.  You can read the full story here: http://www.toledofreepress.com/2008/10/31/don%E2%80%99t-try-this-at-home/

That’s all for this week across the web.  What we can take from it:

• The time for estate planning is NOW.
• I’ve yet to encounter anyone over the age 18 in Michigan who does not have a reason to complete a least  a basic estate plan.
• If you are going to do an estate plan, do it right.  Sometimes an poorly drafted estate plan is worse then having any type of estate plan at all.

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…

Warren Buffet; Buying American

Warren Buffet had an interesting op-ed piece in the New York Times today.  You can read it here.  Basically, he is saying that the time to buy American stocks is now.  He is buying them in his personal fund.

So … I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.

Why?

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

It’s good to hear from one of the richest men in the world that our economy will not totattly self destruct and that there may be a light at the end of the tunnel.

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.

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/

The Cost of Michigan Estate Planning Part II

The other day after paying $4+ dollars for gas I was surfing the internet pricing out a new hyrbid car. Not that I am buying a car right now, but I was fed up with the price of gas. Well, I like leather seats in my car. So I was also looking at the price of upgrading from a standard package to a package that included leather seats. Around this same time I had a potential client balk at the price of an estate planning package that would meet all of their goals and protect their children.

Then it struck me, to upgrade from a cloth package to a leather package in a car was actually less than an estate plan for this family that would protect their children from creditors, predators, bankruptcy, the children themselves while also putting the affairs of the parents in order, avoiding the 3%-5% cost of probate, and many other benefits. All for less cost then the 7 years you will be driving a new car to experience leather seats. Mind boggling when you think about it.

It’s odd what people value and what people say they value.

Price of Estate Planning in Michigan Part I

As a Michigan estate planning lawyer, occasionally I will meet with a potential client in need of estate planning who is very sensitive to price. Prior to meeting with them and finding out their goals and the complexity of what they want to accomplish, I have no idea what the price of a comprehensive estate plan will be. Estate planning for me and my firm is not a “one-sized fits all” proposition. Each family, individual and business is different so each estate plan is also different.

Everyone says they just want a simple will, or simple plan, but they don’t understand the hidden traps, or complexities that need to be overcome to meet their goals.

What are you paying for by preparing an estate plan, especially when you use a lawyer who’s main focus is estate planning? Is it the documents? No, because you can download or by forms off the internet for less then $50. Better yet, and this was new to me, use someone else’s trust document and just change the names.

What you are paying for is a) the expertise b) the counseling c) the documents d) peace of mind that your planning has been done right. That peace of mind that it’s been done right is elusive and difficult to show value of.

The best way to demonstrate it is to look at examples where it has not been done right. I will take a real world. Just recently there was an error in a family’s estate plan that cost a special needs child nearly $800,000. The way the documents read is that this special needs child had a trust that was only funded with $34, when most likely the trust was supposed to be funded with $800,000 of the deceased’s estate. That is an expensive mistake for a family. That one example of the price you can put on peace of mind, not only for you but also your loved ones. That is who this planning is for. I feel comfortable saying that to set up an estate plan ahead of time would have been much cheaper then the $800,000 cost to this decedent.

“Last Lecture” & Leaving A Legacy

Randy Pausch, the professor/scientist who gave the famed “Last Lecture”, has succumbed to the terminal cancer he was diagnosed with back in 2006. His lecture leaves something more valuable than assets or items, it is values and a legacy. Too often estate planners and their clients focus on the money and ignore family, faith, and value issues, especially when planning for families with young children.

Here is his video on YouTube, it is the full lecture and over an hour long, but well worth watching if you have not.

Last Lecture

Here is the CNN story reporting his passing.

The WSJ wrote a quality article about his situation, read it here. From the article

Early on, he had vowed to do the logistical things necessary to ease his family’s path into a life without him. His minister helped him think beyond estate planning and funeral arrangements. “You have life insurance, right?” the minister asked.

“Yes, it’s all in place,” Randy told him.

“Well, you also need emotional insurance,” the minister explained. The premiums for that insurance would be paid for with Randy’s time, not his money. The minister suggested that Randy spend hours making videotapes of himself with the kids. Years from now, they will be able to see how easily they touched each other and laughed together.

Knowing his kids’ memories of him could be fuzzy, Randy has been doing things with them that he hopes they’ll find unforgettable. For instance, he and Dylan, 6, went on a minivacation to swim with dolphins. “A kid swims with dolphins, he doesn’t easily forget it,” Randy said. “We took lots of photos.” Randy took Logan, 3, to Disney World to meet his hero, Mickey Mouse. “I’d met him, so I could make the introduction.”

Randy also made a point of talking to people who lost parents when they were very young. They told him they found it consoling to learn about how much their mothers and fathers loved them. The more they knew, the more they could still feel that love. To that end, Randy built separate lists of his memories of each child. He also has written down his advice for them, things like: “If I could only give three words of advice, they would be, ‘Tell the truth.’ If I got three more words, I’d add, ‘All the time.’ “

You can also view the Last Lecture in written form by reading the transcript here.

More Doom & Gloom

CNN is reporting that foreclosures nationwide are up 121% from this time last year. As bad as people say the Metro-Detroit area is, the worst areas is the Sun Belt area in California, though they report that outside of the Sub Belt, Detroit is the next hardest hit foreclosure location.

Detroit continued to suffer more than any other non-Sun Belt area, with one filing for every 66 households. And several Ohio cities were also hard hit, led by Toledo (one in 92 households), Akron (one in 93) and Cleveland (one in 108).

You can read the article at CNN here.