Oakland County MI Estate Planning Attorney Blog

Answering some basic questions about trusts

2013-06-11T18:32:02Z

Caring for children with special needs, protecting inheritance, maximizing tax planning - these are all reasons that many people consider including trusts in their estate plans. There are more, obviously, because a trust can so often help provide a solution to a wide variety of estate planning needs. The problem for most people, perhaps even some of our Michigan readers, is that there is a certain air of mystery around trusts and trust administration, which can leave some people in a position where they do not even consider the benefits of establishing a trust. A recent article recognized this problem and addressed some of the basic questions people have about trusts.

Trusts are used not only as part of planning a distribution of assets after death, but also for transferring assets during life for maximum tax efficiency, i.e., to pay the least amount of taxes as possible. One common type of trust is the revocable trust, which allows the person who establishes the trust to make changes as needed, or to completely end the trust if required. An irrevocable trust is obviously just the opposite, wherein once the trust is established it is very difficult, if not impossible, to make any changes at all.

]]> One of the biggest questions for those considering establishing a trust is, who will run it? A person might think that they should name someone they know and trust, like when they name an executor for a will, but a trust is a whole different animal. Many people who are involved in this particular area of estate planning would likely advise naming a specific financial institution as the trust administrator, as is the case in the recent article. The article makes the key point that, unlike when a specific person is named, naming a specific institution instead means that some issues with the continuation of the trust will not come up - a specific person will age and die, while an institution does not. And, many financial institutions have whole areas of their company that are devoted to trust administration.

Whether or not a person believes a trust will be right for their situation is up to each individual. But for many people a trust is not only something to think about - it is almost a necessity.

Source: Smart Business, "How to tailor trusts to meet your needs and care for beneficiaries," Susan L. Nelson, June 1, 2013

Is a summer home among your special assets?

2013-06-05T20:03:05Z

Michigan has a great reputation as being a place to go to enjoy the outdoors. Many people from other states will purchase summer homes on one of the lakes to enjoy with their families, or to rent out to others when they aren't in personal use. A summer home is a big purchase for a family, but it is often worth the extra effort and money it takes to maintain a separate house that is sometimes hours away from where a family actually lives. And, when kids get older and start families of their own, the summer home can actually become a focal point for large family get-togethers or a vacation spot for what was one family that has now become several. But does owning a summer home present unique questions from a probate standpoint? According to one recent article, the answer to that question is a resounding "yes."

What is the best way to deal with deciding on a potential heir for the property? As the property could generate strong emotional attachments among several children or siblings who have enjoyed the home in their youth, what is the owner to do about passing this property on? After all, one of the main goals of estate planning is to avoid prolonged probate litigation. Fortunately, the recent article had a few tips on how to handle this situation.

]]> One suggestion was to give away the summer home prior to a transfer through estate planning documents. By discussing concerns openly among all of the parties who may be interested in an ownership stake in the property, a solution could be reached well before any estate planning document even needs to come into play.

The one really interesting suggestion, however, was to create a limited liability company to take control of the property. This route would allow all interested parties to have an ownership share, as well as providing an excellent way to schedule use of the home or rent it out to others.

Everyone has their own unique personal property and assets that may have a greater meaning to some relative over another, whether that is a summer home or not. Making sure that this special piece of property ends up in the right hands can be a goal that is sure to be accomplished with the right approach to estate planning.

Source: LifeHealthPRO, "4 estate planning concerns for clients with vacation homes," Tom Nawrocki, May 31, 2013

Common reasons to consider broaching the topic of estate planning

2013-05-28T20:04:04Z

Some of our Michigan readers may have trouble thinking of this figure: $5.25 million. When it comes to estate planning, however, this is actually a very important figure. $5.25 million is the limit of the federal estate tax exemption. What does that mean? It means that if the total value of an estate is below that threshold it will not be subject to taxation at the federal level. For many people, this will never be a concern because there is no way they would ever earn that sort of money, short of winning the lottery. Unfortunately, this type of thinking also sometimes leads people to think that they do not even need a will, let alone a comprehensive estate plan. In reality, however, this is far from the truth.

A recent article detailed some of the common, every day reasons why a person needs to have a will, even if they don't consider themselves to be well-off or anticipate receiving any type of significant inheritance in the future. The first reason can kind of seem to take a libertarian slant: who do you want to determine what happens to your assets, even if they are limited to you or the government? A will lets a person specifically lay out a plan to designate property distribution. When a person dies without a will, known as dying intestate, state laws will dictate who will receive that person's assets usually relatives in order of familial relationship: spouses and children first, parents, siblings, etc.

]]> What if a person isn't worried about their personal property because the most important thing in their life is their minor children? Well, a will allows parents to designate the guardians of their choice in the unfortunate event that both parents die while the children are still minors.

These are just two examples of how having a will drafted can be the right thing regardless of the value of an estate. There will be other reasons for other people, depending on their individual circumstances. However, most people probably see the value in at least having their wishes written out in a formal document, to be ready for use when the time comes.

Source: MarketWatch, "Estate planning for the rest of us," Bill Bischoff, May 21, 2013

What's best for tax planning and protecting inheritance?

2013-05-22T09:37:38Z

With so many ways to approach estate planning, many people often have more questions than answers. What will the impact be on tax planning? What are the best documents to draft for protecting inheritance? What if I have children with special needs and I want to make sure they are taken care of? The list could go on and on. Fortunately, the simple answer to many of these question is this: trusts. However, there are many types of trusts for an individual or family to consider. One popular method, known as the "living trust," was recently the subject of a very informative article which tried to dispel certain myths about this particular estate planning device.

So what is a common use for a living trust? Well, one use is for married couples who may not want to necessarily leave everything to one another for tax reasons, but instead want to pass that tax burden on to their children, who may be in a better place to deal with the tax consequences of inheriting. First, this type of living trust is set up so that if one spouse dies the other spouse will enjoy the rights to the use and possession of certain assets, but ownership will actually pass on to the couple's children upon the subsequent death of the surviving spouse. This is also commonly known as a "marital trust." Of course, this is just one type of trust. There are many others.

]]> So, which type of trust is the right type for our Michigan readers? The answer to that question, unfortunately, is not so straightforward. Each individual person or family has their own unique circumstances. Where an irrevocable trust may be right for one person a revocable trust is the right option for another. It all depends. Getting the right information on the options, however, makes the ultimate decision on what is right all that much easier.

Source: redding.com, "Lewis Chamberlain: Many myths surround living trusts," Lewis Chamberlain, May 11, 2013

Estate planning and you - do you know the key parts of a will?

2013-05-15T05:51:24Z

Almost all of our Michigan readers probably have a varying amount of assets, and most also have relatives. These two aspects of life may not mix well after a person dies, which is why estate planning is so crucial. Yes, it can be somewhat morbid to sit down and plan out what you would like to see happen to personal property after death, but doing so will spare family members and others the trouble of sorting through all of the legal issues that can come with a will contest or other probate litigation. But what exactly are the key aspects of a will? A recent article tackled that very subject, and it pointed out areas that some of our readers may not have considered before.

First, a will becomes effective upon the planner's death. This is obvious to most people, but there are so many other ways in which a person can protect their assets and pass them on with minimal tax implications that it can be helpful to remind people that a will is often the simplest, but best, start in an estate plan. And most times having even a simple will is better than dying "intestate" - without a will.

]]> Next, a will goes through the probate process upon going into effect. Certain types of assets will be part of this process, but others won't - such as life insurances policies, which are considered "non-probate" and will be paid to the designated beneficiary directly.

Lastly, what are some of the motivations for drafting a will? For many people, being able to designate property distribution is the main motivation. This will ensure that specific assets go to each particular person, be it a relative or friend, that the planner choses. For others, being able to designate guardians to care for minor children in the event of an untimely death is the most crucial aspect of a will. This will ensure that a planner's children are cared for by the individuals they chose - otherwise the decision will most likely end up in a judge's hands.

There are many reasons for our Michigan readers to consider drafting a comprehensive estate plan. But knowing the key ingredients, especially when starting with the drafting of a will, can help people to see the benefits.

Source: Fox 2 now, "Making Sense Of Wills & Trusts," Elliot Weiler, May 1, 2013

Small mistakes can have a big effect on your assets

2013-05-08T04:33:40Z

Any of our Michigan readers who are familiar with previous posts here have seen many that cover topics ranging from the essential nature of drafting a will, the pros and cons of considering trusts in an estate plan and the importance of discussing the options and implications behind appointing a representative in a power of attorney document. A brief overview of the wide variety of possibilities may leave a reader thinking that estate administration is both complicated and expensive. But that doesn't have to be the case.

The complexity of an estate plan will depend on the planner's wishes and, usually, the size of estate in question and the total value of assets involved. Naturally, anyone contemplating an estate planning move will likely have dozens of questions. Sometimes the answers will vary, but what about some of the issues that slip through the cracks? A recent article detailed several areas where even the most careful planner may overlook important considerations.

]]> The recent article discussed several financial mechanisms that would be included under "non-probate" property, including joint accounts - something a majority of our readers likely have or have had at one point. When two people own something like a bank account equally, upon the death of one the other will usually take full ownership. This happens outside of the probate process.

"Probate" property can include a wide variety of assets and personal property, which, if not specifically mentioned and designated for distribution in a will, can become part of the general estate and subject to division as otherwise detailed in the will. The propensity to overlook important details is sometimes just human nature, but in probate court these small details can make a huge difference. Getting familiar all of the potential missteps can help an estate planner avoid even the most minor of errors.

Source: greenbaypressgazette.com, "Carissa Giebel column: Common issues overlooked in estate planning," Carissa Giebel, April 29, 2013

What do you need to know about the probate process?

2013-05-03T06:25:49Z

Although the move to increase people's knowledge of the importance of estate planning seems to have picked up across the country in recent years, many people are probably still confused about the probate process. This is easily understandable. When a person says "probate," some people, even perhaps some of our Michigan readers, will say "what's that?" Conscious of the mystery that surrounds the needs and necessities included in estate planning and probate, the author of one recent article decided to approach the issue in a uniquely simple format: a Top-10 list.

Number one on the list deals with powers of attorney. These documents need to be included in order to appoint someone to make decisions on the planner's behalf in the unfortunate situation that the planner has become incapacitated and unable to make their own decisions. In Michigan, these documents are needed for both financial and medical decisions, and the appointee does not have to be the same person for both situations.

]]> All of the other nine reasons on the list deal primarily with the drafting of a will and possibly trusts. A will or trust allows the planner to specifically designate the individuals or organizations who will receive that person's assets upon death. Without a will, state law makes that determination. For those with minor children, a will also includes a section to designate a guardian for those children in case both parents are deceased. Again, without this provision in a will state law will fill the role of deciding this issue.

A number of the items on the Top-10 list address the reality of the old saying "you can't take it with you." Certain assets, like retirement accounts and businesses, may need special attention to ensure that they are passed on to the appropriate beneficiary, and in the case of business ownership ensuring that the business stays in capable hands.

Why create an estate plan? The answer is different for everybody. However, some of the issues included in the recent article will apply to almost every situation.

Source: New Britain Herald, "Senior Signals: Ten reasons to create an estate plan," Daniel O. Tully, April 21, 2013

Don't forget the simple things during estate planning

2013-04-23T08:08:35Z

In American society today, the Internet has allowed millions of people to find the answers to almost any type of question at the click of a button. No matter how difficult the query, our Michigan readers can be assured that someone out there has almost definitely posted an answer on the Internet, although the veracity of the answer would probably have to be verified. But what about simple questions? Are there simple questions when it comes to estate planning?

One simple question that was addressed in a recent article was: "What are the requirements in drafting and executing a will?" Readers familiar with previous posts here know by now that this document is the bedrock of most estate plans, but what exactly needs to be incorporated into this document's design in order to limit questions about its validity?

]]> In Michigan, as is the case in many states, a person must be at least 18-years-old and of sound mind in order to draft a will. The "soundness" of a person's mind can easily be questioned if a will is drafted during advanced age or terminal illness, which is why it is so important to draft and execute estate planning documents well before they are actually needed.

Further, the will must be in writing and signed, both by the person who is planning the will, known as the "testator," as well as two witnesses. For maximum protection, the witnesses should probably be two people who will not benefit in any way by the terms of the will, although this is not a strict requirement under Michigan law.

It is easy to forget that even the simplest aspects of an estate plan can be the most important things to remember during the document drafting stage. Remembering how important these initial steps are, however, can be crucial in avoiding probate litigation amongst relatives.

Source: moneylife, "'A will should be a simple document, not in legalese'," April 13, 2013

Powers of attorney in every estate plan? Better safe than sorry

2013-04-17T08:04:13Z

What do I need to include in my estate plan? This is a question that many of our Michigan readers will be asking themselves at some point when they begin the process of putting together the necessary documents for their unique situations. Every estate plan is different. Does everyone need to use some kind of trust in their estate plan? Not necessarily, though trusts are great for fulfilling certain needs. However, almost without exception, two important documents that need to be included in a Michigan resident's estate plan are a durable power of attorney and a health care power of attorney.

When many people think of estate planning they think of laying the groundwork for the distribution of their assets after death. While this is a crucial part of the process, a good, comprehensive estate plan will cover other situations as well. If a person becomes incapacitated in some way - but does not die - that is a situation when powers of attorney come into play.

]]> A durable power of attorney will give a trusted friend, relative or associate the power to control a person's finances during a period of incapacitation. This can be a very important role to fill in order to ensure that the person's bills are paid, businesses run or portfolios managed while the person is unable to tend to these financial concerns.

A health care power of attorney allows a person to appoint a patient advocate to make important decisions regarding medical care for an incapacitated person. This can be a truly solemn commitment for the patient advocate. And, as a recent article pointed out, the best way to prepare someone to take on this role is to discuss those types of medical procedures a person is in favor of, as well as those which are unwanted.

Estate planning forces a person to confront many different hypothetical scenarios and set out a plan of action in each case, to the greatest extent possible. Not every situation can be anticipated exactly, and in many ways the powers of attorney documents substitute the judgment of a trusted colleague for the planner's judgment in a time of great need.

Source: The Wichita Eagle, "Learn lesson about end-of-life planning," Bill Hendry, April 7, 2013

Are Michigan residents planning for long-term care?

2013-04-12T19:07:57Z

In the wake of the changes to federal tax law at the beginning of the year, many of our Michigan readers may have seen previous posts here about updating an estate plan to account for the differences from previous years. There is no doubt that tax planning is an important part of protecting assets, which in turn is one of the primary goals of estate planning. However, there is more to an estate plan than simply designating property distribution upon death. People in America are living longer, and as such many people, including many Michigan residents, will probably need to start thinking about long-term planning and retirement when they consider their estate plans. A recent article discussed many of these considerations.

So, what is "long-term planning"? Well, it is the part of an estate plan which accounts for the fact that many people, as they grow into their elder years, will probably need some form of long-term care. As the recent article noted, this can include long-term nursing home care, or perhaps significant surgical operations to maintain a steady and healthy quality of life.

]]> Determining how these types of costs will factor into an estate plan can be a huge part of finding out what a person needs to live out their retirement years as they want, as well as allowing a person to figure out which of their assets will still be left to pass on to their designated beneficiaries. Some people will also need to determine whether or not government benefits will be part of the plan.

Although readers familiar with previous posts here probably know that a will is usually the bedrock of an estate plan, changes in America's demographics are making it clear that long-term planning will continue to grow in significance. Taking long-term care planning seriously when developing an estate plan could be crucial if the need arises later in life.

Source: thetimesherald.com, "Matt Wallace: There's more to estate planning than death and taxes," Matt Wallace, March 30, 2013

When it comes to long-term tax planning, many will use trusts

2013-04-03T12:01:37Z

This is the time of year when many Michigan residents are finding out whether or not they have taken the right approach to tax planning. Withholding too much or too little in taxes from a paycheck will often make the difference between receiving a refund and owing money to Uncle Sam. But what about long-term tax planning? How do Michigan residents make sure that they have the right structures in place for protecting inheritance and guaranteeing the distribution of their estate in the manner they desire?

Anyone familiar with previous posts here knows that a will is essentially the bedrock of any good, comprehensive estate plan. But what if more is needed? Some people may what to consider the advantages of including trusts in their estate plan.

]]> A recent article explored some of the reasons that an individual may want to include a certain type of trust in an estate plan. Many of our readers may think that trusts only come into the picture for people with a large amount of assets - rich people, in essence. But this is not always true. Trusts can be key in making sure that certain assets are passed on to certain beneficiaries. For example, a man who has children from a previous marriage but now has a second wife after a divorce may want to ensure that his new wife is taken care of in the event of his death, but he actually wants ownership of the property in his estate to pass to his children from the previous relationship. In this scenario there is a specific type of trust which will allow the subsequent spouse to enjoy the use and distributions from the estate for the remainder of her life, but upon her death the estate would pass to the deceased husband's children.

There are so many different scenarios in which a trust could be the best option for an estate plan, whether the trust is a revocable trust, irrevocable trust or a trust for children with special needs, for example. Knowing when to consider trusts in an estate plan could make the difference in seeing the assets in an estate pass to the intended recipient - with minimal tax implications.

Source: nj.com, "Your Legal Corner: Trusts," Victoria M. Dalton, March 24, 2013

Claim against director's estate could lead to probate litigation

2013-03-25T16:56:53Z

For many Americans, and perhaps some of our Michigan readers, the probate process can be a bit of a mystery. Of course most people know that they should at least have a will, even those people who don't have one. The problem, however, is that many people simply do not know what will actually take place when the time to use that will comes around. Although anyone planning out and executing an estate plan usually does so with the express goal of avoiding probate litigation, that is not always possible. Estate administration can be tricky at times, but as long as the estate planning documents are clear and the executor is competent, the whole process will generally go much more smoothly.

For instance, some of our readers may remember movie director Tony Scott, who died last year in an apparent suicide. Although Scott had some hit movies in recent years with "Unstoppable" and "Man of Fire," both starring Denzel Washington, most would say that his undeniable claim-to-fame was directing the iconic Tom Cruise movie "Top Gun." Scott's estate is still going through the probate process, and a recent report indicated that the agency that represented him had made a claim against the estate for commissions due.

]]> According to the report, Scott's estate has a value of approximately $1.25 million. The claim against the estate is seeking payment of commissions due reportedly in the range of $1 million. The executor of the estate has denied the claim, but neither side currently seems inclined to fight the matter out in probate court. The report indicates that the parties may attempt to work out a settlement.

An estate plan is intended to ensure that assets and personal property are distributed in accordance with the planner's wishes. When unexpected claims come up, it is the duty of the estate executor to consider whether or not the claims are valid and should be paid - or denied. Nobody wants an estate to be tied up in probate litigation, but when this does happen it is important to have a competent executor who is getting the right information about how to proceed through the process.

Source: Deadline.com, "Tony Scott Estate Rejects CAA Commissions Claim," Dominic Patten, March 14, 2013

When is the right time to consider estate planning?

2013-03-20T16:01:25Z

Many of our Michigan readers may often think, "I know I should consider my options for estate planning, but when is the right time?." There are definitely certain times in life when a person is more likely to think about getting their affairs in order. For instance, watching relatives going through probate litigation in a will contest could create a sense of urgency to do better yourself in order to avoid such a situation. For others, the birth of a child could provide a perfect reminder that one of the most important aspects of a will for someone with minor children is to name guardians in the unfortunate event of an untimely death. In the latter case, a recent article provided a few tips for those young adults who are getting started in life and considering an estate plan.

One of the most important points in the article is that sometimes even just having a basic will is better than dying "intestate" - without a will. Appointing guardians for minor children is never an easy thing to think about, and some people may be hesitant to talk about such a scenario with the people they chose. However, crafting an estate plan necessarily includes thinking about unfortunate, and hopefully unlikely, scenarios. Covering your bases is part of the process.

]]> Another tip was to make sure that the named beneficiaries on accounts such as 401(k)'s and IRA's align with what is included in the will. Oftentimes young adults with minor children will want their assets to pass not to the named guardian, but to their minor children - to be held in trust by the guardians for the benefit of the children. Taking this approach to designate property distribution will most likely bring up the topic of trusts, which can be particularly useful in making sure certain assets are received by certain beneficiaries.

Every person's situation is different, and each estate plan is different. But one fact remains constant - having an estate plan is usually much more helpful to family members, loved ones and friends in a difficult, unexpected situation. Detailing your wishes will provide direction.

Source: HampshireReview.com, "For Parents-to-Be, a Few Financial and Legal Tips," March 11, 2013

Do you have the right powers of attorney in your estate plan?

2013-03-15T15:02:24Z

Previous posts here have detailed how important it is to have a sound, comprehensive estate plan. But, what exactly is the most important part? Some would argue that it is the will, some that a certain trust is a priority. It really does just depend on the situation, but one part that can make the most difference during a critical time is the inclusion of powers of attorney.

A recent article asked, why are powers of attorney so important? Well, it is because many people don't think about what exactly they would decide during some of life's most crucial moments - after a car accident and hospitalization, for example - until it is too late. But what if a person is so badly injured in an accident that they are effectively incapacitated? How will doctors know what steps a person would prefer in their medical treatment, and how will others know how to take care of that person's financial affairs?

]]> In Michigan, there are two kinds of power of attorney: a durable power of attorney and a health care power of attorney. A durable power of attorney is needed to empower a representative to look after financial and business affairs, and to make any decisions which are required on that front during the planner's period of incapacity. A health care power of attorney appoints a patient advocate to make medical decision on the incapacitated person's behalf. For each of these documents the appointed representative can be a trusted family member, friend or associate, and they do not have to be the same person for both.

Estate planning can be confusing to someone who is considering for the first time how to best plan for the succession of their possessions and assets, as well as planning for the late stages of life. Some estate plans can be complicated, others can be quite simple. It usually depends on the size of the estate in question. However, one thing that is almost always true: everyone should have an estate plan, and that estate plan needs to include all of the appropriate documents, including powers of attorney.

Source: money.usnews.com, "How to Develop Effective End-of-Life Plans," Philip Moeller, Feb. 26, 2013

The "blended family" - how will it affect your estate plan?

2013-03-05T16:02:01Z

Over the past few decades our society has seen the rise of what is known as the "blended family." Think of "The Brady Bunch" here - a blended family is when a couple gets married after they were previously married to someone else with whom they had children. The blended family is a household where the re-married couple and all of their children are living together. Although this may sound like a good time for everyone involved, there is the potential for conflict and controversy in a blended family, maybe even more so than in a traditional family. And the conflict could rise to dangerous levels when the issue of estate planning comes up.

A recent article detailed some of the best ways to account for these family changes in an estate plan. Entering into this type of family situation will of course necessitate the updating of a will and probably some other documents. A re-marriage is a prime opportunity to evaluate the changes that will be needed in an estate plan. New relatives might need to be included, or left out. Guardians for minor children may change as well.

]]> This is all assuming that an estate plan was already in place prior to the blending of families. If a person dies without an estate plan, or at minimum a will, that person is said to have died "intestate." If this is the case, state law will determine who will receive a portion of the estate and how large that portion will be.

One of the primary goals of an estate plan is to avoid probate litigation. With a blended family, the potential for court battles is ripe if a will does not specifically designate property distribution. A formerly divorced person getting re-married can be great, and new stepchildren can be a blessing, but it is important to remember that big changes like this may necessitate big changes to an estate plan.

Source: Poughkeepsie Journal.com, "Plan estate carefully for blended family," Bernard A. Krooks, Feb. 23, 2013