Estate Planning In Michigan

Archive for the ‘Wills’ Category

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/

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.

Why is Michigan Probate Viewed as Something to be Avoided?

The word “probate” is derived from the Latin phrase “to prove.” The legal definition of probate means a court process by which a certain instrument is proved to be your Will. Typically when people use the word “probate” they are talking about the whole estate administration procedure. The transfer of assets of the deceased to his or her heirs. Technically, “probate” only refers to the process of administering assets through the court system.

The first reason Michigan Probate is viewed as an evil is the emotional connotations attached to death and the legal proceedings. People have difficulty dealing with the emotions in the process.

Anorther reason is that almost every family has a story about a disastrous result which occurred when someone passed and their assets had to be probated. Deep dark secrets can come to light in the public proceeding. Remember, Michigan probate is a public court proceeding.

There is also a financial reason why Michigan probate is viewed as something to be avoided. It can be expensive. Not only through legal fees, but also court costs and taxes if proper measures are not taken ahead of time.

Remember a will does not avoid the probate system and does not ensure that your estate will be administered smoothly. There can be public, nasty, will contests in probate court.

Taking all these reasons into account, it is no wonder that many clients choose to use a revocable living trust to avoid the probate system in Michigan.

Trust vs. Will

Common questions my clients have are why are revocable living trust so popular, why do most people choose a revocable livng trust instead of a will for their estate planning needs?

There are a few reasons why the living trust is a powerful and flexible alternative to just a will based estate plan.

First, in Michigan, a living trust avoids the Michigan probate system. A will is probated through the probate court while a trust will avoid probate all together. The trust distributes your assets directly to your chosen beneficiaries.

Next, a will can be inconvenient for your heirs to administer. With a will, your heirs and loved ones, burned with your passing must hire a lawyer to probate your estate since a will does not avoid probate.

Another reason is the administrative cost of a will. A probate in Michigan can be an expensive process eating up three to five percent of any assets. These costs goto attorneys, judges, and other administrative fees.

Additionally, the process can be time consuming. Michigan probate can take six months to years to administer your assets.

Another advantage of a living trust is that your distribution will be confidential. Michigan probate is a public affair, while the administration of a trust is private and confidential.

If you have any questions, contact my office at (248) 865-4700

Estate Planning Myths

Estate Planning is a very complicated area of the law in Michigan where myths abound and they can be harmful to you and your loved ones. Below is a list of common myths about estate planning.

If I have a good Will in Michigan, Michigan probate will not be required, and my assets can be transferred immediately to the beneficiaries of the Will. In fact, having a Will mandates a probate in most circumstances and the assets may not be transferred to the heirs for months or years.

Probate in Michigan is a court proceeding to transfer title from the decedent’s name to the living beneficiaries. Probate occurs in the state of your legal residence as well as any state where you own real property. The length of time to complete a Probate varies from state to state, but can take six to eighteen months, on average. Probate is frustrating to the heirs and is public record.

I don’t need a will if I have a small estate. Many people also believe that if there is no Will, all the decedent’s assets will be distributed to the surviving spouse.

If you don’t create a valid Will, the state of Michigan has a statute that will dictate where your assets go and who will administer your estate. Michigan law may not distribute your assets to the people you want to have them.

A Will covers all my assets. in Michigan, wills do not cover assets held as joint tenants with right of survivorship, retirement plans, annuities, life insurance, financial account with payable on death or transfer on death designations.

I can do my own estate plan. Estate planning is more than just creating documents. It is understanding the big picture and how the legal documents will work in concert with the assets and Michigan laws at the time they are needed.

I don’t need an estate plan because I hold all my assets jointly with another. In fact, this is one of the worst ways to plan you estate. The asset may be exposed to estate and gift taxes; it does not avoid probate, just delays it until the last owner’s death; it may cause estate, gift and capital gains taxes; it is subject to the creditors of all owners; and it will result in the transfer of the property to the joint owner when one owner dies, even if that was not intended taxes.

You can’t afford to rely on myths when it comes to your estate. Find out the facts, plan carefully and execute a plan to provide you with peace of mind and security for your loved ones.

What Happens to The Children?

A common concern of parents of minor children is “who will take care of my children if i die?” Through proper estate planning you can make the decision as opposed to leaving it up to the court system to make the decision for you.

However, this decision is one of the toughest for parents to come to a decision on. Often times, it is so difficult it leads to inaction and procrastination. This deadlock could be one of the major reasons why 57% of Americans do not have a will or estate plan set up.

Unfortunately, this deadlock can have very unfortunate consequences. For example, if the planning is not completed one potential outcome is that someone who you may not like or trust could end up being the guardian of your child or children. If you do not name a guardian in your estate plan, a judge who has little knowledge of your family situation could appoint just about anyone he or she sees fit to assume the role of subsitute parent in your stead upon your passing. A very frightning proposition.

Another potentially harrowing outcome is that there could be a legal battle to decide who will assume the role of guardian for your children. If more than one person wishes to assume the role you could be setting up your family and loved ones for a time consuming, stressfull, and expensive legal tug-of-war battle, that more often than not has no real winners.

And most frighting of all, what happens if the kids are dumped on a family member who has no interest or desire to be a guardian or, even worse, the children are put into foster care. Another scary proposition for any parent.

Meeting with an estate planning attorney can help with the decision making process. As professionals who see these situations on a daily basis we have creative solutions to solve the dilema and counsel parents past the deadlock of indecision through effective legal counseling.

Don’t let this tough decision be a roadblock to completing an estate plan, because the consequences can be dire.

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.