Estate and Trust Planning
When you need a team that does more than prepare documents, but actually invests in you and your family’s needs, look no further.
Estate planning is more than just a Will. It usually involves a number of documents and the proper advice to protect you and your estate during your lifetime and after. We work with you to develop a plan to minimize liability exposure and taxes and pass your estate in the most cost-efficient and effective manner to your family or other beneficiaries. Assets, family situations and goals vary, and you should not rely on what others have done based upon their circumstances. The tools and strategies to accomplish your goals need to be tailored to your own situation. We can help.
Estate and Trust Planning may include the following:
- Living Trusts
- Durable Powers of Attorney (“Designation of Patient Advocate”)
- Estate and Gift Tax Planning
- Irrevocable Trusts
- “Ladybird” and other Deeds
- Beneficiary Designations
- Special Needs Trusts
- Education Trusts
- Medicaid Planning (“Elder Law”)
- Charitable Gifts
- Family Cottage Succession Planning
Pathway to Peace of Mind
Estate planning and probate administration are much broader in scope than most people realize. This practice requires not only knowledge of the laws and practical aspects of estate planning, probate, and trust administration, but also knowledge of the laws governing business organizations, real estate, personal property, and taxes. Our trusts and estates attorneys have experience in all of these areas, enabling them to provide practical planning advice from a comprehensive, multifaceted perspective.
Timeline for Probate Process
- Your role begins with an initial conference with a probate attorney to provide your attorney with information.
- Your attorney will prepare pleadings and a fee agreement for your signature.
- You will be asked to sign the initial pleadings and fee agreement and may need to obtain to signed renunciations or waivers and consents from other interested parties.
- Your attorney will file pleadings and Will/Codicils (if any) with Probate Court. If filed in person (rather than by mail) you can usually expect to be appointed as Personal Representative (PR) by the Probate Court the same day.
- Your attorney will send notices of appointment, fee agreement, and Will (if any) to interested parties (within 14 days of appointment).
- Your attorney will send a notice to creditors to the legal newspaper in the county of the proceeding (date of publication begins the four month claim period).
- Your attorney will send provide a separate notice to “known” creditors from a list of creditors you have provided. Usually this is sent approximately 30 days before the four-month claim period expires.
- You and your attorney will obtain information and values (as of date of death) of assets (both probate and non-probate).
- Your attorney will prepare and you will sign an Inventory of probate assets. Your attorney will send a copy of this inventory to interested parties within 91 days of your appointment.
- If applicable, your attorney will send a Notice of Statutory Rights and Elections to the surviving spouse and/or minor children.
- Your attorney will send a copy of the inventory to Probate Court disclosing the value of the probate assets for purposes of calculating the probate fee due.
- You will be asked to pay a probate fee upon receipt of invoice from Probate Court (must be paid within one year of appointment of PR).
- You will need to file the decedent’s final income tax returns for all years prior to death and for the year of his or her death for income earned to the date of death. In addition, you may have to file fiduciary income tax returns for income earned after date of death through the date the estate is distributed.
- If applicable (usually only in estates worth over $5 million) your attorney (or accountant) will prepare and file (and PR signs) Federal and State estate tax returns. You are responsible for paying any taxes due from the estate assets no later than nine months after date of death.
- You and your attorney will dispute any questionable claims by sending a Notice of Disallowance to creditor within 63 days after presentment of the claim by the creditor.
- You will pay any valid claims from the estate assets.
- You and your attorney will prepare an Accounting and send a copy to the interested parties. You may also send a proposed distribution schedule.
- You will distribute the balance of the probate estate to devisees or heirs (You can obtain receipts from them at that time or use canceled checks as proof of distribution).
- You will sign and your attorney will send a copy of a “Sworn Statement” to close administration of the estate to interested parties.
- Your attorney will file the Sworn Statement to close administration along with proofs of service (for Notice of Appointment, Publication, Attorney Fee Agreement, Inventory, Notice of Election, Accounting and Sworn Statement) with the Probate Court.
- Unless someone objects within 30 days after filing sworn statement, the Probate Court will issue a Certificate of Completion and the estate administration is closed.
The vocabulary of estate planning can be confusing, even intimidating. This easy-to-understand guide to common legal terms and concepts will provide you with basic information about the options available to meet your needs.
For more information and assistance, contact an Estate Planning attorney at Mika Meyers
A Will is a document that directs the distribution of your individually owned assets at your death. Although a Will does not help in avoiding probate, it does allow you to choose who will receive probate assets if probate is required. The Will usually directs how the debts and taxes are to be paid, indicates who will receive your tangible personal property (furniture, jewelry, vehicles, etc.), and who will receive the remainder of your Estate. The Will nominates a personal representative (formally known as an executor or executrix) who is responsible for paying your debts and taxes and distributing your assets as directed by the Will. The Will may also nominate persons to serve as guardians if you have children who are under the age of 18 or are adults but are otherwise unable to care for themselves.
The only assets that are governed by the terms of the Will are those that you own in your name alone at death or that are payable to your Estate. Assets you own jointly with rights of survivorship with other persons who survive you will pass automatically to the surviving joint owners upon your death, regardless of the provisions of your Will. Assets such as life insurance and other death benefits will be paid directly to whomever you have designated as the beneficiary of those benefits.
Joint Ownership of Property
Many people use joint ownership to avoid probate. By owning assets jointly with one or more other persons, the asset does not pass through probate. Instead, the ownership of the asset passes automatically to the surviving owners. This is frequently looked upon as a cost-effective way to avoid probate and Joint ownership combined with other estate planning approaches, can be a very helpful and viable tool to meet your needs. There are, however, many disadvantages to joint ownership arrangements.
Joint ownership with a spouse can help protect your assets, however, allowing another individual, such as a child, to have ownership rights in your assets can complicate your ability to manage those assets and may give rise to adverse claims by your child’s creditors or a divorcing spouse. Further, after you pass away there is no assurance that this child will share the asset with his or her siblings on an equal basis. Even if the asset is placed in joint ownership with all of the children, if one child predeceases the parent, that child’s children, may be disinherited upon the parent’s subsequent death. Alternatively, the asset may require the cooperation and participation of all of the children in order to complete a sale or otherwise transfer the asset. If one of the owners refuses, passes away, or becomes incapacitated, then the sale of the asset can become complicated or even prevented. It is a good idea to talk with your estate planning attorney about these issues before deciding to use joint ownership as an estate planning tool.
A Revocable Living Trust
A Trust is a separate legal entity designed to hold assets. Revocable Living Trusts allow a person’s assets to pass outside of probate without many of the disadvantages or risks of joint ownership. The major advantages of establishing a Trust and transferring assets to the Trust are:
- To the extent you transfer assets to a Trust in your lifetime, those assets will avoid probate upon your death;
- If you become mentally incompetent at some point, then the trustee can manage the assets in Trust for your benefit without the necessity of a probate court conservatorship proceeding; and
- After your death, the Trust can provide for distributions to children or other beneficiaries when they reach the ages you specify in the Trust Agreement. A Trust Agreement is very flexible and its provisions can vary tremendously from person to person.
A Testamentary Trust
A Trust contained in a Will is referred to as a “Testamentary Trust”. This Trust does not come into being until you pass away. By its very nature, a Testamentary Trust is part of the probate process, and therefore use of a Testamentary Trust does not avoid probate. Changes in the law have eliminated the benefits of a Testamentary Trust in most cases, but it is still an available tool in appropriate cases.
Durable Powers of Attorney
A Durable Power of Attorney is one of two key documents used to assist you and your family should you become disabled during your lifetime, and should be part of any estate plan. A Durable Power of Attorney is a document in which you name another person to act for you in handling your financial affairs during your life. In this document, you can delegate a broad range of powers to the agent so that the agent can manage your affairs if you become mentally incapacitated or physically disabled. The document continues in effect until you or a court revokes it or until your death. A properly prepared Durable Power of Attorney avoids the need for the court to appoint a conservator to manage your assets during your lifetime.
Designations of Patient Advocate
A Designation of Patient Advocate is a second tool to help you plan for any potential disabilities. Michigan law allows you to appoint a “patient advocate” to make decisions concerning your care, custody and medical treatment in the event you become unable to make those decisions yourself as the result of an accident or illness. This document is essentially a medical Durable Power of Attorney. It specifies the responsibilities and authority of the patient advocate under circumstances where you are unable to make medical care and treatment decisions for yourself, as determined by your attending physician. It may also include a directive concerning your wishes regarding the use of life-sustaining technology.
In 1996, Congress passed the Health Insurance Portability and Accountability Act (“HIPAA”) to help assure that people’s medical information remains private. As a result of this act, there are stringent requirements for health insurance providers to keep a patient’s health information confidential and disclose it only to persons authorized by the patient. A HIPAA authorization form should be executed if you would like certain individuals to have access to this information so they may deal directly with your physicians, insurers, or other health care providers.
A Ladybird Deed is a deed named after Ladybird Johnson, President Lyndon Johnson’s wife, and can be used to pass title to another person or persons at your passing. The person who signs the deed essentially reserves a life estate in the property and retains the right to sell the property during his or her lifetime and the right to retain the proceeds from that sale. The deed specifies that if the property is still owned by you at the time of your death, the property will pass to individuals or entities that you name in the deed. Essentially, the deed provides a method for avoiding probate if you still own the property at your death but reserves all the freedom to deal with the property during your lifetime. Ladybird Deeds are becoming more popular, primarily due to Medicaid qualification rules. A house that is under a Ladybird Deed still qualifies as an exempt “homestead” under the Medicaid rules.
Tools for Minimizing Estate and Gift Taxes
While Michigan does not currently assess an estate or gift tax (sometimes referred to as a “death tax”), Federal Government does assess an estate tax on assets held by a person at the time of their death. While exemptions are currently very generous (approximately $12 million per individual, approximately $24 million per married couple), for people with Estates in excess of that amount there are many tools for managing their property to eliminate or minimize the estate tax their family will have to pay after they pass away.
Estate Tax Planning Trusts
For married couples with Estates in excess of the estate gift tax exemption, it is often beneficial for each spouse to have a separate Revocable Living Trust with special language that allocates the Trust assets into separate sub-trusts after death. These are sometimes referred to as “A-B Trusts” or “Credit Shelter and Marital Trusts”. The basic reason for having separate Trusts for each spouse is to make sure that the couple can take advantage of both of their estate tax exemptions to minimize estate tax on the last spouse’s death. Without this planning, a couple who has one simple Living Trust or owns all of their assets jointly may waste one exemption or lose out on protecting the growth on these assets from estate tax. Separate Trusts are not usually needed unless the couple’s combined assets are likely to exceed the two times the federal estate tax exemption then in effect at the time of their death.
Annual Lifetime Gifting
You can eliminate or minimize your estate tax exposure by gifting away assets during your lifetime. Any individual can give up to the annual exclusion amount to another individual in a calendar year without having to pay any gift tax and without even having to report the gift to the Internal Revenue Service. The annual exclusion amount is currently $17,000 per person per calendar year. This allows an individual with four children to give away up to a total of $68,000, annually, and not be required to report those gifts to the Internal Revenue Service. If a person gives away more than $17,000 per individual, only the amount above $17,000 is a reportable gift. While a gift tax return must be filed in the year in which a gift in excess of the exempt amount is given, no tax needs to be paid. The taxable gift is applied against the donor’s lifetime gift tax exemption (currently approximately $12,000,000) and an assessment of the tax impact of the gift is made at the time of death.
An Irrevocable Trust is a Trust that cannot be revoked or amended by the grantor during the grantor’s lifetime or at the grantor’s death. It is distinguishable from a Revocable Trust, which can be revoked or changed during the grantor’s lifetime. By creating an Irrevocable Trust and transferring assets to the Trust, the person removes those assets from his or her Estate. Typically, such Trusts provide a mechanism to avoid creating a taxable gift, while assuring that the asset is no longer considered property of the decedent at the time of his death.
There many different types of Irrevocable Trusts and other mechanisms that can be used to manage assets where the potential Estate is greater than the federal estate tax exemption. Each has characteristics that may appeal to a particular individual under certain circumstances. These vehicles include:
- Irrevocable Life Insurance Trusts (“ILIT”)
- Intentionally Defective Grantor Trusts (“IDGT”)
- Qualified Domestic Trusts (“QDOT”)
- Grantor Retained Annuity Trusts (“GRAT”)
- Family Limited Partnerships (“FLP”)
- Qualified Personal Residence Trusts (“QPRT”)
- Charitable Remainder Annuity Trusts (“CRAT”)
- Charitable Remainder Uni Trusts (“CRUT”)
- Charitable Lead Annuity Trusts (“CLAT”)
- Charitable Lead Uni Trusts (“CLUT”)
- Pooled Income Funds
- Gift of a Remainder Interest
- Charitable Gift Annuities
- Life Insurance Gifts
If you have questions about any of these trusts or other vehicles, please contact an estate planning attorney at Mika Meyers.
Our Estate Planning team often encourages clients to discuss their wishes with loved ones openly and early, even though it can initially be an uncomfortable conversation. Even if you have communicated these wishes verbally, these instructions — together with your attorney’s counsel — will help your survivors handle the many tasks required after your death.
A complete Estate Plan goes beyond the preparation of appropriate documents. You also need a mechanism to communicate your wishes to your loved ones after you are gone. The following is a list of 13 tasks that your loved ones may need to address after you are gone.
- Call the funeral director.
- Notify family members, friends, and business colleagues.
- Notify and consult with your attorney as soon as possible.
- Begin recording expenses associated with your death (keep receipts) and record any funds received.
- Contact your employer (if applicable) for final paycheck, benefits, and life insurance.
- Obtain multiple copies of your death certificate from the funeral director for filing of claims and transferring assets. Usually one death certificate is needed for each titled asset.
- Contact your insurance agents to file life insurance claims.
- Apply for social security benefits through the funeral director for death benefit payable to surviving spouse (if applicable).
- Cancel credit cards (or convert to single name if appropriate).
- Re-register automobile(s).
- Cancel subscriptions and memberships, if appropriate.
- Contact your insurance agents to confirm that all insurance policies are current on your automobiles and real estate.
- Secure your home, vacation property, automobiles and other valuable property.
Mika Meyers can assist you in communicating these wishes to your loved ones. We provide tools for easing these communications as part of a complete Estate Plan for our clients. If you already have an Estate Plan that does not provide these communication tools, please feel free to contact one of our Estate Planning attorneys to obtain this packet of tools and communication aids.
For more information and assistance, contact an Estate Planning attorney at Mika Meyers.
Non-Traditional Couples: Life & Estate Planning Challenges
When it comes to estate planning, non-traditional couples in Michigan face greater challenges than couples in a traditional marriage. Generally, these relationships lack the same legal benefits that marriage bestows. Consequently, benefits must be established through the use of careful planning and documentation.
The Michigan legislature provides a template for the appointment of fiduciaries and the distribution of assets after death. While necessary and well intended, the law is designed primarily with married couples and traditional families in mind. Frequently, the choices made by the State Legislature do not meet the needs of non-traditional couples. These shortcomings are particularly stressful when the decisions concern medical treatment, end-of-life issues and funeral arrangements. The estate planning attorneys at Mika Meyers can help you create a plan that both honors your relationship and provides for your loved ones.
We believe it is critical for people in this situation to meet with a supportive attorney early, when they are still able, to ensure they make choices that reflect their wishes.
For more information and assistance, contact an Estate Planning attorney at Mika Meyers
At Mika Meyers, we strive to minimize our clients’ liability exposure to every extent possible. Having sufficient liability insurance coverage is the first line of defense. A good estate plan, however, will take into account liability exposure beyond insurance coverage in determining the estate planning documents to use and how assets should be owned.
If you are unmarried, your options for asset protection are somewhat limited. A revocable trust does nothing to protect your trust assets from exposure; however, Federal law protects certain retirement plans from creditors. There is a variety of methods for protecting assets, including placing them in an irrevocable trust, establishing an LLC or other corporate entity, titling automobiles in the name of the primary driver alone, etc.
For a married couple, there are a few more options available to protect assets. For example, one alternative is to move ownership of some assets from the spouse who is involved in a riskier occupation or activity to the other spouse. A married couple may also own assets as “tenants by the entireties.” This term refers to a special form of joint ownership between married persons that protects assets from claims against only one of the spouses. In other words, an asset owned as tenants by the entireties does not become part of a decedent’s estate at death; rather, it passes directly to the other spouse, free of claims by the decedent’s creditors.
For more information and assistance, contact an Estate Planning attorney at Mika Meyers.
Estate Planning Mistakes
Despite your best intentions, there is a myriad of pitfalls that can leave your loved ones unprotected, or ill-protected, after your death. At a minimum, they may become engaged in a lengthy and stressful legal process. At Mika Meyers Beckett & Jones, we know from experience that a highly skilled Estate Planning attorney is your best defense against a protracted probate process.
The following are 10 of the most common mistakes people make with respect to estate planning:
1. Avoid the Issue Completely
Many people find it uncomfortable to deal with their own estate plan because of the underlying issues of death and disability. Others simply assume that they do not need an estate plan until they reach retirement age. However, every adult should have some estate plan to cover not only the distribution of assets upon death, but also management of assets during incapacity. As we all know, death or incapacity can strike at any age. If you fail to plan for those possibilities, the expense, confusion, and additional stress upon your family or others that you leave behind can be tremendous.
2. Rely Upon Advice From a Friend or Neighbor
Our friends, family, and neighbors like to advise us on how we should arrange our affairs. However, an estate plan that may be appropriate for one person is seldom appropriate for another. We each have different assets, liabilities, personalities, and estate planning objectives. An estate plan should be developed and tailored to achieve your particular objectives.
3. Hire an Unqualified Person to Advise You Regarding Your Estate Planning Matters
Believe it or not, there are actually companies that sell estate planning services over the phone or door-to-door. Sometimes they send out a “paralegal” to meet with you and bring information back to the home office to develop pure form documents that are not tailored to your particular needs. Worse, their fees are often 2-3 times more expensive than the fees charged by an experienced and sophisticated estate planning attorney. These companies often give assurances that should a problem arise, they will cover the cost of probate or other necessary amendments to the documents in the future. However, these companies are often here today and gone tomorrow. You are more likely to be left with empty promises. Also, there are other individuals selling products that refer to themselves as providing “estate planning services.” These individuals are very rarely competent to draft wills, trusts, powers of attorney, designations of patient advocate, and other common estate planning documents. You should retain an attorney who has the requisite specialization and expertise to prepare the appropriate estate planning documents.
4. Assume That a Will Governs the Distribution of All of Your Assets Upon Death
If you read a will, it certainly sounds as though it governs the distribution of all of your assets upon death. However, the will only governs the distribution of those assets that you own in your own name alone at the time of death (or death benefits that are payable to your “estate” rather than to named beneficiaries who survive you). The will does not govern the distribution of assets that you may own jointly with others who survive, death benefits such as life insurance or retirement plans that are payable to named beneficiaries who survive you, or assets that are titled in the name of a separate trust at the time of your death.
5. Assume That a Will Avoids Probate Proceedings
Many people assume that if they have a will, they avoid probate proceedings with respect to their assets upon their death. Actually, as explained above, the will only governs the distribution of those assets that you own in your name alone at your death or that are payable to your estate. These are the assets that must go through probate proceedings. Therefore, a will does not avoid probate; rather, it allows you to choose who will receive the assets that do go through probate. If you do not have a will, but you have assets titled in your name alone at death, those assets still go through probate but pass according to the laws of “intestate succession.” This generally results in your assets being distributed to your closest heirs under a scheme of distribution devised by the state legislature. That distribution may or may not be appropriate under your particular circumstances depending upon who you leave surviving you and what your wishes are with respect to your assets.
6. Assume The a Will Protects You in the Event That You Become Incapacitated
A will, by its very nature, comes into effect only at the time of your death. The fact that you may have appointed a personal representative to handle the distribution of your assets upon your death in your will does not authorize that person to act for you during your lifetime or during any period of incapacity. In order to appoint someone to act for you if you become incapacitated, you should execute a Durable Power of Attorney to authorize them to act for you in your financial matters, and a Designation of Patient Advocate to authorize them to make medical decisions for you in situations where you are not able to make them for yourself (usually these Designations include language that is typically referred to as a “living will”). Without a Durable Power of Attorney or a Designation of Patient Advocate, if you become incapacitated, a guardianship or conservatorship proceeding may be necessary to have people formally appointed by the court to make financial and medical decisions for you.
7. Create a Trust But Fail to Transfer Your Assets to the Trust
If you are a single person and choose to create a trust in order to avoid probate proceedings upon your death, you need to actually retitle your assets into the trust prior to your death in order to avoid probate. Simply creating the trust and leaving the assets in your own name will not avoid probate. It is often this second step of retitling assets that is left undone. In that event, you will have incurred the cost of creating a trust yet still fail to avoid the cost of probate proceedings at your death. You may also have to change the beneficiary designations on life insurance and retirement plans to make certain that those death benefits do not pass through probate. For married couples with one trust, it may be better from a liability exposure perspective to own many assets jointly as husband and wife (rather than in the trust). In short, you should obtain advice from an experienced estate planning attorney regarding how to own each asset under your particular circumstances.
8. Own All Assets Jointly With a New Spouse When You Have Children By a Prior Marriage
In a second marriage, often the couple places all of their assets in joint name for simplicity and to avoid probate upon the first spouse’s death. While this may be appropriate for some couples in a first marriage; the problem in a second marriage is that often the spouses assume that upon their death, their surviving spouse will leave some assets to their children by their first marriage. However, the surviving spouse may remarry and retitle everything jointly with his or her new spouse. As a result, simple joint ownership in a second marriage where there are children by a prior marriage can result in the unintentional disinheritance of your children by your first marriage. In those situations, it is usually better for each spouse to have a separate trust that provides for the surviving spouse and also provides for the children by the first marriage. Sometimes life insurance in this situation can assist in making certain that your children by your first marriage are amply provided for at your death.
9. Own All Assets Jointly With Your Souse When Your Total Combined Worth Exceeds Twice the Federal Estate Tax Exemption
For a married couple fortunate enough to have a total net that exceeds twice the Federal Estate Tax exemption (currently approximately $12,000,000 per spouse, but subject to annual cost of living increases), special planning may be required to minimize the estate tax liability which will be imposed upon the last spouse’s death. In those situations, joint ownership may be inappropriate and may result in more estate taxes being payable than necessary. Appropriate estate planning for a married couple with larger estates typically involves each spouse having a separate trust and making sure sufficient assets are titled in or will pass to each spouse’s trust regardless of which spouse dies first. Through this planning, the couple can increase the amount of assets that can be protected from estate tax.
10. Fail to Review and Update Estate Plans
Attorneys attempt to draft estate planning documents so that they anticipate circumstances that may arise such as the death of a beneficiary or a person appointed to serve as personal representative. As your circumstances change, you may not need to revise your estate planning documents. However, it is important to review your estate plan every few years in order to make certain that it still meets your objectives at that time. As we all know, our assets and liabilities, our estate planning objectives, and our family situations change throughout the years. It is important to make certain that your estate plan is appropriate in light of all of these changes. Many clients start out with a more simple estate plan and as their estate grows and their family circumstances change, they fail to revise their plans. This can result in people being appointed to handle an estate as a personal representative or handle a trust as a trustee who are not appropriate under the circumstances. Failing to revise an estate plan can also result in greater loss of assets to estate taxes and expenses than is necessary had the appropriate plan been in place.
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