Estate Planning In Michigan

An Estate Built for Special Needs

The Wall Street Journal had an interesting article regarding how to plan for special needs children.  As our office does this type of planning, it is good to see the word getting out that this type of planning is a necessity.

You can find the rest of the article here:

http://online.wsj.com/article/SB122351155944317491.html

A key compenent when our office prepares a special needs trust is the letter to caregivers.  The article talks about this concept in detail:

Letters for Caregivers

There are some other key steps families with special needs should take. Parents should create power-of-attorney or guardianship documents for finances and health care, naming themselves as their child’s agent or guardian when their child turns 18. Without this formality, parents of kids over 18 may not be able to have access to their child’s medical records or make health-care or financial decisions, says Boston lawyer Harry S. Margolis, the co-founder of the Academy of Special Needs Planners.

It’s also smart to create a “letter of guidance,” a document spelling out everything another caregiver should know about their child’s special needs, including medical diagnosis, treatment and medications, specific likes and dislikes, and food preferences or aversions. “You know things about your children that no one else on this earth knows,” says Michael Gilfix, a Palo Alto, Calif., lawyer who does a lot of special-needs planning. “This includes little things, like what breakfast food makes them happy or what breakfast food makes them really angry.”

Ms. Valentine, a client of Mr. Gilfix, recently wrote a letter of guidance for her son, Gabe. The document describes how Gabe is a huge San Francisco Giants fan, so any caregiver should make sure he gets tickets to home games. He doesn’t like ice cream or cake, but likes pizza. His epilepsy medication affects his teeth, so the letter recommends that he get his teeth cleaned regularly. “He actually loves the dentist,” she says.

If you have any questions on how to plan for a special needs child, please contact our office at (248) 865-4700.

Tips for Selecting a Michigan Estate Planning Attorney

1. Identify prospective attorneys.  Talk to people who work with estate planning attorneys and friends and family who may have done estate planning.
2. Schedule Screening Interviews.  Estate planning is an important process and you need to feel comfortable in selecting an attorney to work with you and your family.
3. Determine if the attorney is qualified.  At the first interview, ask basic questions, for example : What percentage of your practice is devoted to estate planning?  What types of clients have you worked with?  Ask for references.
4. Understand the Network of professionals.  Estate planning requires a holistic approach that involves a team of specialists: your attorney should not be a lone ranger.
5. Discuss Fees.  You want someone that has a fee schedule that you are comfortable with.  Like many things in life, this is an area where you get what you pay for.
6. Contact any references given.  Was the attorney proactive?  Responsive?  Any regrets or concerns?
7. Prepare for the second interview.  Ask follow-up questions and bring personal documents you wish to discuss, such as current estate planning documents or insurance policies.
8. Select your Michigan lawyer.  You want someone who is qualified, with whom you are comfortable, and has a network of professionals that he or she works with.
9. Put it in writing.  Have a written fee agreement or retainer agreement to ensure that your expectations are met.

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

Mixed Families; What to do if Your Spouse is not the Parent of All Your Children

In this day in age of increased divorce rates and multiple marriages in Michigan, it is not uncommon for there to be a situation for a married person to have descendants from prior marriages. Often, this can cause conflicts after your death unless your spouse has adopted your children while they are young.

The problem arises because you have a decision to make, leave assets to the spouse and possibly disinherit your children (what’s stopping your spouse from remarrying after your passing and freezing out your children?). Or leave your spouse high and dry in favor of your children.

Through a trust based estate plan it is possible to plan for the spouse while still protecting the inheritance of the children. This can be done by creating trust that in essence “locks up” a portion of the assets for the benefit of the spouse while living, then to the children. But the spouse does not retain full control of the assets in this “family” or “locked up” trust. An important consideration is who you appoint trustee of any trust where there is provisions that “lock up” any of the assets.

Alternatively, separate assets can be used to fund each of the goals. For example, life insurance could be purchased and put into an irrevocable life insurance trust (ILIT) to ensure that beneficiaries use the portion alloted to them properly, by your own terms.

Regardless, the most important take away is that with multiple marriages, it is important to take these factors into consideration and visit an estate planning attorney for counsel.

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.