Michigan Estate Planning

When you do not put your wishes in writing as to how you would want your assets distributed after your death, the State of Michigan has created an estate plan for you, which are the laws of intestacy. Unfortunately, this plan may not be what you want, and the person making the decisions may not be the person you would choose. The result may be very costly in both time and legal expenses. In addition, there is no protection for heirs who have disabilities or need protection from creditors. The best plan is to have it in writing drafted by a professional.

Many people want flexibility in their estate plan, and will leave all of their assets to one person to distribute either as they see fit or, “they know what I want and will take care of it.” There are many problems with this scenario. You are leaving your loved ones without recourse if the person you trust changes their mind about complying with your wishes and sharing what you have left them to distribute. You cannot be sure they will, in fact, distribute anything to anyone much less in the way you would want. If that trusted person declares bankruptcy, gets divorced, or has a sudden illness or injury, the chances of your loved ones receiving anything are iffy at best. Having your wishes accurately reflected, in writing, is a loving legacy for your family.

There are many different types of Trusts for different purposes. Revocable Trusts are for helping to manage your affairs during your lifetime, especially in the event of disability or incapacity. Revocable trusts are also used for a smooth transition of your legacy to the next generation without involving court proceedings. Different types of trusts may offer protection and access to resources while your loved ones are young, and it may offer protection from creditors, divorce, and misspending, while still others offer significant tax benefits during your lifetime and after you are gone. Not everyone necessarily needs a trust, but a good estate-planning attorney should be able to review your current needs and objectives and create an effective plan that meets your needs.

After the death of the first spouse, often the surviving spouse remarries. Without a well-drafted trust based estate plan, there may be no protection for your children and there is a good chance your children will never receive their rightful inheritance. Blended families are very common, but the estate planning needs are even more essential to preserve and protect the rights of the children. Without proper planning, the children’s inheritance is left to the discretion of the new spouse.

So, you have met with an estate-planning attorney and signed the documents that reflect your wishes but you have not changed beneficiaries on accounts, filed deeds with the county, or updated the ownership of your assets. An unfunded trust is worse than no trust. You have invested your time and resources into creating a plan that avoids probate, but failing to transfer your assets into your trust (i.e., funding your trust) will often cost time and resources, including court involvement that the plan was designed to avoid.

Creating your estate plan is not something that can collect dust and be left on the shelf. As life changes your estate plan needs to be modified to reflect it. As a general rule, your estate plan needs to be reviewed at least once every three years by a professional or after a major life event. Even if your family or life has not changed significantly, there may have been tax or law changes which effect your plan you may not know about until you have your plan reviewed by a professional. A good rule is to review your plan when you prepare your taxes, and in particular, make sure the parties you have nominated to serve in different roles are still the people you would want today, not just if you are gone, but if you become unable to care for yourself.

We don’t always love whom our children choose to love for a variety of reasons. A well-drafted estate plan can protect your child in the event of a divorce so their soon to be ex-spouse does not receive a share of what you leave to your child. Depending on the quality of your child’s marriage, it may provide a bit of financial freedom and independence from a spouse that is too miserly, or protection from one who spends too freely and is financially irresponsible. If you don’t want that in-law to get half of what you leave your child or simply have the freedom to spend it all, then you need an estate plan that reflects your wishes and protects your child.

Sometimes, despite your best efforts or your child’s best efforts, they have failed to thrive and become a successful independent adult. You may have a child that has started 16 businesses, including four retail stores, six multi-level marketing schemes, three franchises, and three real estate, “deals.” All have failed. He has asked you to financially back each one, and has asked you to bail him out of each one. He has declared bankruptcy twice and is in trouble with the IRS. Proper trust planning can prevent creditors from reaching your child’s inheritance and provide oversight in helping to ensure your legacy is there to enhance your child’s life and not wasted.

This might be better positioned as the top mistake people make. Joint ownership tends to be a do-it-yourself estate plan. People may add someone as a joint owner in haste when tragedy occurs, or when a loved-one’s health significantly declines. Many who add individuals as owners on property, whether a bank account or parcel of real estate, are doing so for convenience or probate avoidance not realizing that in fact, they are making an estate plan. Further, adding a joint owner can completely undermine an existing estate plan. If one child is chosen as the joint owner, the effect is to disinherit all other children, which often leads to hard feelings. Joint tenancy can also put your assets at risk. If your joint owner gets a divorce, is sued, or declares bankruptcy, your asset is part of a marital estate and reachable by creditors. Adding a joint owner may also have unintended consequences such as rendering someone ineligible for Medicaid assistance, or cause an increase in otherwise avoidable taxes.

Often people rely on the fact that they have a trust, and feel that their legal affairs are in order. However, there are very powerful documents that are vital to keeping your legal house in good shape, and those are your financial and medical powers of attorney. Those documents are helpful for convenience while you are well, and critical if you become incapacitated. They grant legal authority for someone to make decisions, including life and death, if you cannot. Those documents, in particular, need to be reviewed and updated on a regular basis.An experienced attorney can assess the current need of an individual, address the concerns the individual and the family has about authority and control, and review planning options. The attorney, together with the family, creates a sustainable plan to allow for a loving legacy.