Estate Planning In Michigan

Posts Tagged ‘Living Trust’

The Problem With Michigan Trust Kits

Living trusts have been aggressivly marketed to the Michigan public.  Unfortunatly, there are many non-lawyers out their marketing trust kits in Michigan or trust preperation services.  Buying one of these “trust kits” can be a huge financial mistake that not only effects you but also your loved ones.

The targeted customers of these salesmen are typically seniors.  They will lure the seniores in by either going door to door or holding free seminars.  More often than not, these seminars will not be taught by an attorney, but by a salseman.  They will advertised to the senior a one-size fits all estate plan, usually for over $2500.  Quite often these “trust kits” end up being a fill in the blank type document and the customer never even meets with an attorney.

There have been reports of Michigan citizens losing over $200,000 to Federal Estate taxes based off these poorly drafted plans.

If you had a estate plan or “trust kit” drafted by one of these outfits, contact a Michigan estate planning lawyer, as soon as possible to rectify the matter and create an estate plan that serves your wishes and provides for your loved ones.

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.

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

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

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.

How to Wrap Up a Trust in Michigan

Our firm assists clients as trustees in administering Michigan Trusts. Some tips for wraping up a trust include the following

1. Carefully and accurately read the terms of the trust agreement, as well as the powers and limitations of the trustee’s power.
2. File final tax returns.
3. Determine the shares for the beneficiaries and heirs after any expenses.
4. Prepare any conveyances or liquidate the assets.
5. Distribute assets and obtain receipts from the beneficiaries and releases and indemnifications when appropriate.
6. Prepare the final report and provide it to any interested persons.
7. Get court approval of the final report when it’s appropriate.

If you have any questions or want more information, contact me at (248)-865-4700.

Does a Will in Michigan Avoid Michigan Probate?

No. This is one of the largest misunderstandings clients have who are interested in estate planning in Michigan. Let me say it again so it is clear, a will does NOT avoid the Michigan probate system. I have discussed some of the ways to avoid probate, often the best way is through a properly drafted and funded revocable living trust, but a will does not. Think of your will as your ticket to the Michigan Probate system in all of it’s glory. Sure, the court systems follows your wishes with a properly admitted will, but it does not avoid the process.

Funding Your Living Trust

At our firm, estate planning is more than just preparing documents. Estate planning is about providing expertise and counseling from the beginning of our client engagement through the funding of the trust, if a trust based estate plan is used.