When a couple gets divorced, their estate plan needs to be updated. This is because the original plan was likely based on the assumption that the couple would always be together. Now that divorce is on the horizon, it's important to make sure your estate plan reflects your new circumstances. If you don't update your estate plan after divorce, you could end up with a lot of problems down the road. In this blog, read about the impact of divorce on an estate plan and how to make changes to reflect your new situation.
Understandably, divorce can have a significant impact on all aspects of life, including your estate plan. If you have gone through the process of creating an estate plan, it is important to review and update your documents after your divorce is finalized. Here are some key changes to keep in mind:
If you named your former spouse as a beneficiary on any accounts (life insurance policy, retirement accounts, etc.), be sure to update the beneficiaries to reflect your current wishes.
If you named your former spouse as the guardian for any minor children, you may wish to appoint someone new in their place.
If you named your former spouse as an agent under a durable power of attorney, you will need to appoint someone new.
If your former spouse is named as executor or trustee of your estate, you will need to name someone new in their place. You may also need to make changes to the distribution of assets in your will or trust.
If you have any questions about updating your estate plan after a divorce, contact an experienced estate planning attorney and ask for their guidance. They can give you the help you need to make the most informed choice for your future.
When it comes to planning for your financial future, there are a lot of different options to choose from. One option that many people don't know about is the retirement trust. A retirement trust can be a valuable part of your estate plan in Michigan. In this blog, learn what a retirement trust is and how it can help you secure your retirement future!
A retirement trust is defined as an irrevocable trust created for the primary purpose of holding retirement assets, such as 401(k)s, IRAs, and other pension or profit-sharing plans. The retirement trust is designed to provide benefits to the settlor during their retirement years and can be structured in a number of ways to achieve this goal.
There are several reasons why someone might opt to create a retirement trust as part of their estate plan. One reason is that it can help manage retirement assets and distribute them according to the settlor's wishes. Another reason is that a retirement trust can provide tax advantages. For example, if the settlor dies before they have withdrawn all of the funds from their retirement account. In that case, those funds can be distributed to their beneficiaries without incurring any tax penalties.
A retirement trust works by holding retirement assets in an account that is managed by a trustee. The trustee is responsible for investing the retirement assets and distributing them according to the terms of the trust. The settlor can choose to have the trust pay out benefits during their lifetime or after their death.
Creating a retirement trust is just one way to plan for retirement. There are many other options available, so it's important to speak with a qualified estate planning attorney to determine what's best for you and your family. If you have questions about retirement trusts or other aspects of estate planning, contact the team at Michigan Law Center, PLLC today. We would be happy to help you plan your most effective future.
Many people interested in estate planning are unsure of the difference between wills and trusts. While both instruments allow you to distribute your assets after death, there are some key differences between the two. Keep reading to learn the differences between wills and trusts in Michigan to make the best decision for you and your family.
A will is a document that directs how your property will be distributed after you die. You can use a will to:
A trust is another way to direct how your assets will be distributed after you die, but with some important differences from wills. Trusts can be revocable or irrevocable. Revocable trusts can be changed at any point during the settlor's lifetime, while irrevocable trusts cannot be changed once they are created. This means that with a trust you can:
While wills and trusts both allow you to direct how your assets will be distributed after you die, there are some important differences to consider. These include:
As mentioned above, one of the main advantages of using a trust is that it can help you avoid probate. With a will, your assets will go through probate after you die. Probate can be time-consuming and expensive, so avoiding it can be a major advantage.
With a will, you have less control over your assets' distribution than with a trust. With a trust, you can place conditions on how and when assets are distributed, which gives you more control over what happens to your assets after you die.
Another advantage of using a trust is that it can help you reduce or eliminate estate taxes. With a will, your assets may be subject to estate taxes when you die.
Deciding whether to use a will or a trust is an important decision in Michigan estate planning. If you have questions about wills vs. trusts, or any other aspect of estate planning, contact an experienced Michigan estate planning attorney today.
You may not want to think about the unexpected occurring. But the fact is if something happens and you don't have an estate plan in place, your loved ones will have a great bit to deal with in the aftermath - and that can be a lot harder than it needs to be. In this blog post, we'll discuss what should go into an estate plan in Michigan. We'll cover wills, trusts, powers of attorney, and healthcare directives. So whether you're just getting started on your estate planning or you're looking for a refresher course, read on!
A will is primarily used to outline what happens to your property and possessions after you die. You can use a will to:
If you die without a will, state law regarding estates will determine how your property is distributed.
Creating a will is one of the most important things you can do for yourself and your loved ones. It can give you peace of mind to know that your final wishes will be carried out and that your loved ones will be taken care of according to your wishes.
Trusts are also popular estate planning tools. A trust is created when a settlor (the person who creates the trust) transfers property to a trustee. The trustee manages the property on behalf of the beneficiaries designated by the settlor. Trusts can be used in various ways, including asset protection, minimizing taxes, and planning for loved ones with special needs.
A power of attorney allows you to appoint someone to make financial and legal decisions for you if you ever become incapacitated. If you do not have a power of attorney in your estate plan, your loved ones will have to get authority from the court to handle your affairs, which can be time-consuming and expensive.
There are two types of power of attorney: durable and nondurable. If you become incapacitated, your appointed person's durable power of attorney remains in effect; nondurable power of attorney expires if you become incapacitated. You can choose to have one type or both types in your estate plan.
A healthcare directive sets forth your wishes regarding medical treatment in the event that you are unable to communicate those wishes yourself. For example, you can use a healthcare directive to specify whether you want to receive life-sustaining treatment if you are ever diagnosed with a terminal condition.
A healthcare directive can also appoint someone to make medical decisions on your behalf if you are unable to do so yourself. Choose someone who you trust to make decisions in accordance with your wishes and what they believe would be the best option for you.
There are many things to consider when creating an estate plan. The best way to ensure that your wishes are carried out is to work with an experienced estate planning attorney. An attorney can help you determine what kind of documents you need and how to best protect your assets. If you need help creating an estate plan, reach out to the team at Michigan Law Center, PLLC. We advocate for our clients at all parts of the estate planning process.
1. Dying Intestate
If you die without a Will or some other form of estate planning, the state in which you reside and the IRS will simply make one for you. Of course, they have no interest in avoiding or reducing estate taxes, minimizing estate administration costs or protecting your family and legacy. The distribution of your assets will just be turned over to the Probate Court. The probate process is needlessly time consuming, frustrating and expensive. It is also open to the public, meaning creditors, predators or anyone else will have complete access to all information about your estate. For the vast majority of people, the benefits of a Will or other estate planning tools far outweigh any initial costs.
2. Having an “I love you” Will
An “I love you” Will is one in which all the decedent’s assets have been left to the spouse. On paper, it might seem to be a caring, thoughtful gesture, but the reality is quite different. That’s because such a Will simply passes the complex issues and problems associated with transferring and protecting wealth onto the spouse or other loved ones. An “I love you” Will creates more problems than it solves, particularly for future generations.
3. Giving property outright to your children
Here is another “solution” that might sound good at first, but ignores several important realities. For instance, what if the child in question is too immature to handle the responsibility of a large sum of money on his or her own? What if the child suffers a severe financial setback that puts the inheritance at risk to creditors? What if the child marries a fortune-hunter, is addicted to drugs or alcohol, gets divorced or remarried? In short, you may need to protect your children and heirs from their own poor decisions.
4. Owning property jointly
There are two types of joint ownership, Joint Tenancy with Right of Survivorship (JTWROS) and Tenants in Common (TIC). Problems with JTWROS include postponement of probate until last tenancy, loss of the double step-up in tax basis, and outright distribution. With TIC, you also lose the double step-up in tax basis, and your property is subject to the estate plan of each tenant as well as probate for each tenant.
5. Not having a trust
A trust is the single most effective estate planning tool available. There are many different types of trusts. Among the better known and more commonly used are revocable trusts, irrevocable trusts and testamentary trusts. In addition to protecting your privacy, a trust will help you leave what you want, to whom you want, in the way you want—at the lowest possible cost.
6. Not funding your trust
A trust can be thought of as a safe. It can do a great job of protecting your hard earned wealth, but if there’s nothing in the trust—i.e. nothing in the safe—what good does it do you? None whatsoever. Which begs another question, why would someone go to the trouble of creating a trust and then not fund it? The answer is quite often that the person in question simply never gets around to it. He or she procrastinates, resulting in an unfunded trust—which is worse than no trust at all. Estate Planning The Ten Most Avoidable Mistakes
7. Not having your documents reviewed and updated
Once they have their estate planning and other documents created, many people simply file them away and never look at them again. Big mistake. An outdated plan can be as bad or even worse than having no plan at all. Your documents should be reviewed, at the very least, every two years. Why? In a word, change. Your needs and goals change; your financial situation changes; your children grow older and their needs change. The law itself is constantly changing. And even if you’ve specified a trustee or executor, the named person’s ability to follow through on your wishes may change as well. Updating your plan allows you to take these changes into account and avoid unintended consequences.
8. Dying in 2011
We may say this tongue in cheek but, given the current status of the laws governing estate taxes, there is nothing funny about how much of your estate will be lost to estate taxes should you pass away in 2011. That’s because the Bush administration’s 2001 estate tax modifications will expire in 2010, meaning the exemption amount will return to the 2002 level of $1,000,000 (down from $3,500,000 for 2010) and the maximum rate will increase from 45% to 55%. If you think this is unusual, consider this: laws governing estate taxes have changed more than 20 times since 1986. Which only underscores the importance of getting expert legal advice to prepare for and cope with continuous change.
9. Thinking a Living
Trust alone is enough The Living Trust is a powerful estate planning tool, but to truly ensure your wishes are carried out should you become incapacitated and incapable of making decisions for yourself, addendums can be extremely helpful. For example, an Advanced Healthcare Directive can dictate how you wish to be cared for and what steps you authorize medical personnel to take to prolong your life. A HIPAA Authorization can ensure your privacy while still making crucial medical information available to the people you want to have it. A Power of Attorney for financial affairs determines in advance who will be able to make financial decisions for you. Other commonly used addendums include Pourover Wills, Assignment of Personal Property, Community Property Agreements, Appointments of Guardianship or Conservatorship, to name a few.
10. Not understanding that the biggest problem is not the IRS
If the biggest threat to preserving your wealth is not the IRS, who or what is? Frankly, it is human nature. None of us wants to think about our own deaths or the possibility of becoming incapacitated. Consequently, we tend to put off taking the steps necessary to prepare for what the future may hold. We procrastinate. And our loved ones often suffer the painful financial consequences. Perhaps Walt Kelly put it best: “We have met the enemy and he is us.”
Part of a continuing series regarding what can be paid for from a special needs trust. The most common question a special needs trust client has is, “What can the trust pay for?” Policies regarding distributions change frequently and differ from state to state. What is allowable in one jurisdiction may cause a disruption of benefits in another. In general, a special needs trust is extremely flexible as to what it can and will provide. A trustee of a special needs trust generally does not pay for any good or service otherwise available through governmental benefits. Governmental benefits arguably provide for the basic needs of an individual, such as income, housing, medical benefits, and food. Professional trustees, in most circumstances, will not issue cash or a cash equivalent, such as a pre-paid card, due to the immediate impact on the individual’s benefits. The Trust itself is designed to supplement governmental benefits, not replace them, so needs that can be met through outside entities should be exhausted first before seeking payment from the Trust.
Depending on the terms of the trust, a trustee can pay for the basic needs of the individual under certain circumstances, especially in an emergency where the health and safety of the beneficiary are in jeopardy. Payments from the trust for the basic needs or support of the beneficiary may cause a decrease in monthly income or loss of other benefits. This situation can arise even if no money changes hands. For instance, an adult child living in his parent’s home rent-free may see a one-third reduction of his SSI check as in-kind support and maintenance (ISM). A trust that owns a home can pay for all expenses related to the home, including utilities. In most states, this will cause a one-third reduction of the SSI income, but the benefit to the beneficiary outweighs the loss of income. If there are others living in the home, the trustee may have a lease agreement and receive rent to help support the home. Overall, the duty of the trustee is to act in the best interests of the beneficiary and there are circumstances where the benefits to the beneficiary outweigh the penalties. These types of distributions should be done with the professional guidance of special needs attorneys so as to minimize any potential negative impact and maximize the benefit to the beneficiary.
Generally, distributions from the trust must meet several criteria: (1) the distribution must be for the sole benefit of the beneficiary, (2) in his or her best interests, (3) otherwise unavailable from other resources and/or no other responsible party, and (4) be fiscally prudent. Most often clients will inquire about the purchase of a home and transportation. Can they be purchased by the Trust? Yes. However, it must be done in light of the considerations outlined above and the purchase of any home should not be done without professional guidance, and with court approval if the trust is supervised. If the beneficiary is a minor, the trust does not relieve a parent of their obligation to provide for the basic needs of their minor child. Even though parents are losing jobs and facing economic difficulties, the court is generally unsympathetic to requests for funds or purchases to meet the basic needs of the children.
The most important practice tip is that a special needs trust is a very flexible document in which the trustee has full discretion to act in the best interests of the beneficiary. Every jurisdiction has its quirks. Even though the trusts are written pursuant to federal statutory authority, the administrative policies differ greatly between states. An experienced special needs planning attorney can help set reasonable client expectations, which are important for the client’s future relations and satisfaction with the Trustee and/or special needs trust attorney.
People with disabilities are disproportionately low-income. Like many other marginalized communities, people with disabilities are being priced out of many neighborhoods, especially in large metropolitan centers, as rental prices continue to skyrocket and affordable housing stocks dwindle.
According to a 2015 report from the Consortium for Citizens with Disabilities and the Technical Assistance Collaborative, the national average rent for a one-bedroom apartment is more than the entire Supplemental Security Income (SSI) benefit in every major metropolitan area in the country. SSI, which serves more than eight million people nationwide, is the nation’s primary low-income support program for people with disabilities.
Most government housing programs specifically geared toward people with disabilities are at the state and local, rather than federal, level.
In New York City, for example, tenants with disabilities in rent stabilized apartments can apply for the Disability Rent Increase Exemption Program (DRIE). DRIE caps tenants’ monthly rents at the year they apply for the program, and the city Department of Finance provides tax breaks to landlords to make up the difference between the tenant’s frozen rents and future lawful rental increases.
Dozens of states and cities (including North Carolina, New York and Georgia are required to provide supportive, low-income housing for people with disabilities under settlements stemming from Americans with Disabilities Act (ADA) lawsuits. The ADA’s “integration mandate” requires states to provide appropriate services to ensure people are not unnecessarily institutionalized, and thus segregated.
Sole Federal Program
At the federal level, the sole disability specific low-income housing program is the Section 811 Supportive Housing for Persons with Disabilities program, a subset of the better-known Section 8 voucher program.
Although the 811 program has existed since 1959, the program received a major boost in 2010 with the passage of the Frank Melville Supportive Housing Investment Act. While previously the program funded housing for only about 900 new vouchers a year, the Act provided funding for more than 3,000 to 4,000 new vouchers annually.
The program is structured as a grant program and is administered by state housing agencies. Applicants, primarily nonprofit organizations, must partner with state health and human services and Medicaid agencies, to ensure that tenants receive appropriate, supportive services. Similar to tenants receiving regular Section 8 vouchers, the rents of Section 811 participants are capped at 30 percent of their incomes.
Households participating in the Section 811 program must contain at least one person with a disability and be very low-income, as defined by the Department of Housing and Urban Development (HUD). As such, their income must be below 50 percent of the “area median income,” which HUD calculates annually for hundreds of municipalities nationwide.
Life insurance can be beneficial in replacing lost income for young families, but as people get older, it can also serve a purpose as part of an estate plan.
Historically, one main reason to buy life insurance as part of an estate plan was to have cash available to pay estate taxes. Now that the estate tax exemption is so big (in 2016, estates can exempt $5.45 million per individual from taxation), most estates don’t pay federal estate taxes. However, life insurance can still be helpful in a number of other ways.
To find out if you should include life insurance as part of your estate plan, talk to your attorney.