The West Michigan Estate Planning Center

As households around the country wind up the Christmas lights, purchase New Year's Eve noisemakers, and pop the cork on a bottle of champagne, you can bet that the beneficiaries of those with modest-sized estates will be toasting to the long lives of their benefactors. On January 1, the non-taxable portion of an estate will drop from $5.12M to $1M overnight.

This means that if a person passes away by 11:59 p.m. on December 31, 2012, the estate of that person won't incur any estate tax unless it is valued in excess of $5,120,000. Assuming that Congress isn't able to pass tax law changes before January 1 - a fair assumption - the non-taxable portion of an estate from a person who passes away after shouting their first "Happy New Year!" of 2013 will drop to $1,000,000. Any value in excess of the $1M ceiling will be subject to the estate tax, which can be taxed up to 55%. Click here for more information on estate and gift taxes

One doesn't need a six-figure checking or savings account to throw their heirs to the wolves (the tax wolves, if you will). It's important to remember that your estate will be valued with the inclusion of all assets - the value of your home, life insurance policies, stocks, bonds, etc. So how can you mitigate the negative effects this may have on your estate plan?

Continue reading "ALERT: 2013 Estate Tax Changes" »

On May 23, 2012, the Governor of Michigan signed Enrolled Senate Bill 92 (PA 2012, No. 141) yesterday, which deals with new requirements for durable powers of attorney for finances. The law lists new requirements for Durable Powers of Attorney, which become effective for all Durable Powers of Attorney signed after September 30, 2012.

A Durable Power of Attorney is a legal document that designates an agent who can act on your behalf for all of your financial transactions. Most of the time, Durable Powers of Attorney are effective only upon someone's disability. In certain circumstances, Durable Powers of Attorney can be effective upon signing.

The new law requires two witnesses sign the Durable Power of Attorney, or that it is notarized, or both. The most significant change in the law is the requirement deals with a "acceptance of designation". Durable Powers of Attorney signed after October 1, 2012 are not effective unless the designated agent signs an acceptance of designation. The acceptance of designation that sets forth all of the agent's duties.

Continue reading "Michigan enacts new laws for Durable Powers of Attorney" »

Unfortunately, most Americans don't worry about estate planning until it is too late. Estate planning is a term that encompasses many things from Wills and trusts to disability and business succession planning. Take the short test below to test your estate planning "IQ".

Estate Planning Test:

True or False:

1. I don't have much, so I don't need an estate plan.
2. Estate plans are for people with assets that have a value of over $250,000.
3. Having a Will avoids probate.
4. A good way to avoid probate is to deed my house to my children.
5. I am too young to worry about estate planning.

1. False. We like to say, if you own a pair of shoes, you have an estate and need a basic estate plan. The truth is that most of us have some estate: a house, bank accounts, life insurance, IRAs, household goods, a wedding ring, or a pair of shoes. Who should get these items if something were to happen to you? You can ask any estate planning attorney and they will tell you that every time a client has said, "I am not worried, I have told my kids who gets what and there won't be any fighting,", that the exact opposite happens. Click here to read: "How to avoid fighting over mom's stuff". No matter how much or how little "stuff" you have, you should plan for its distribution after your death. With some thoughtfulness and communication with your family, you can help to preserve family relationships for years to come.

2. False. Certainly, bigger estates come with more complications and need advanced estate planning. But, even small estates require planning. Just like in the answer above, estate planning is important to help manage children's expectations. It is also an important cost saving for you. Most sources estimate that the cost to probate an estate is anywhere from 2-8% of the value of your estate. On average, the cost is 5% to probate an estate. This means an estate of $100,000 would expect to pay $5,000 for probate related costs. Read about different costs associated with probate. Estate planning is generally not as costly as probate costs, plus you get to control how and when your estate is distributed and to whom.

3. False. If you die without a Will, the probate court relies on Michigan statutory law to determine how to divide your estate. If you die with a Will, the probate court uses your Will to determine how to divide your estate. You should also be aware that your Will becomes available to the public once a probate estate is opened. Your personal representative (PR) will have to file an inventory of all of your assets, or in other words, the value of your estate. Your PR will also have to file a list of the names and addresses of all of the people who may have a right to inherit something from your estate. At that point, anyone can find out how much you had and who is going to get it. Most people do not want anyone to know this information, regardless of the size of their estate.

Continue reading "What is your estate planning IQ?" »

The divorce rate among first marriages has hovered around 50% for decades. Click here to view Divorce Statistics Another phenomenon in the area of remarriages is the fact that people are living longer. Often one spouse may die and the surviving spouse will remarry. If the spouses have children from their first marriages, thought needs to be given to how estates will be distributed. Thought must also be given to the age, health, and finances of the surviving spouse. Second marriages and remarriages provide a vast number of estate planning issues that need careful planning. Click here to read how Lucille Ball's daughter was unintentionally disinherited

The best strategy is always to plan ahead. Highlighted below are seven considerations and potential solutions for planning for second marriages.

1. How long has the second marriage lasted? The second spouse is often regarded with resentment from the children and first family for taking the place of the first spouse. Over time, this resentment may fade as the children realize that their parent and the second spouse are truly happy together. Therefore, the duration of the remarriage should be a factor in considering how to allocated an estate to a spouse upon their death.

2. The financial situation of the parties. The relative financial positions of the parties should also be considered. In looking at this factor, it should always be contemplated with respect the duration of the marriage. We had clients who were remarried for over 30 years. The husband was in an accident and suffered from a head injury. The couple had used the wife's IRA to live on for the past 20 years and was almost completely gone. It was determined that the husband's IRA, which would allow the wife to continue to live her middle class lifestyle, named his children as the beneficiary. Without the IRA money, the wife would be destitute. In this case, the husband lacked the capacity to understand the situation and make a change. If he had the capacity to make a change, he could have left his IRA to his wife on the condition that she name his children as the beneficiary on her death.

3. Looking at the situation from the heirs point of view. Often, in a remarriage, it is assumed that both parties will leave everything to one another and the last to die will split everything equally between all the children from both sides. There are many factors which prevent this from happening. First, a spouse might die and the living spouse may live for many years, even decades. During this time the money in the estate may be used to care for the living spouse. Depending on the age and health of the surviving spouse, there could be the complication of another remarriage.

In our experience, a great deal of thought should be given to what the children of the first marriage will receive should their parent be the first of the couple to die. A careful estate planning attorney will help their clients by looking at the matter from the heirs' point of view. A solution can be to provide an outright bequest of a portion of the estate, or name them as beneficiaries on an insurance policy. This money will be protected for them if their parent is the first to die. This solution helps those children to feel loved and not slighted by their parent or the step parent. Our firm often recommends this solution, especially if the parent has married a much younger spouse.

Failing to consider the situation from the heirs' eyes can lead to a lifetime of bad feelings and unnecessary and unintentional hurt.

4. What if there are prenuptial agreements? A prenuptial agreement should always be reviewed prior to any estate planning to ensure that the estate plan is consistent. Often times, if the second marriage has lasted for a significant amount of time, the prenuptial agreement may need to be altered to reflect the changing circumstances of the couple. Over time, the income of the parties may have changed, the health of the parties will probably be different, and the children of first marriages will have different circumstances. An attorney should provide guidance and counsel to clients to make sure that their goals for the estate plan don't contradict other legal agreements.

Continue reading "Yours, mine, and ours: Estate Planning for Second Marriages" »

Many people utilize trusts as an essential part of their estate planning. And for good reason--trusts can be an essential element to help distribute wealth and protect assets. But while most people may be familiar with the use of a trust to manage the assets of their estate, many do not know they can specifically design a trust to manage the purchase of their firearms regulated by the National Firearms Act (the "NFA").

More importantly, many do not know that they should create an NFA Gun Trust. The NFA, sometimes referred to as "Title II", regulates the purchase, use, possession and transfer of silencers, machine guns, short-barreled shotguns and rifles, and other items. Those looking to purchase, protect and transfer these kinds of firearms will be pleased to know that it is not only legal, but it can be made much easier by the implementation of a Gun Trust.

Continue reading "What is a Gun Trust and why do I need one?" »

There comes a time in our lives when we are faced with having to discuss when it is time for someone to stop driving. This is, quite possibly, a more difficult conversation than estate planning. In the United States, especially, our independence is linked to our ability to drive.

According to SmartMotorist.com, "In the next 20 years the number of elderly drivers (persons 70 & over) is predicted to triple in the United States. As age increases, older drivers generally become more conservative on the road. Many mature drivers modify their driving habits (for instance to avoid busy highways or night-time driving) to match their declining capabilities. However, statistics show that older drivers are more likely than younger ones to be involved in multi-vehicle crashes, particularly at intersections.

The news is filled with stories of elderly drivers who have had serious accidents, many times involving death. As a nation ages, elderly drivers present greater risk on the road

The question becomes how we, the adult children, neighbors, physicians, and caregivers, can help the driver recognize when it is no longer safe for them to drive. The best case scenario is to have the "driving" talk before it is an issue. Once there is a concern or crisis, it is much harder have the necessary discussions. Experts recommend recognizing that not being able to drive should not lessen one's quality of life. In order to perserve one's expectations of independence, pre-planning is a must. Family members should determine when the driver is driving and for what purposes. A plan can be put in place to accommodate the driver's needs, for example, grocery shopping, exercise classes, senior center visits, church, lunch dates, and visiting friends and family. There are also local resources to assist those that are unable to drive. A list may be available at the local senior citizen center, area elder care organizations, and retirement communities. The key is helping the driver to maintain a feeling of independence and mobility.

Continue reading "Elder estate planning can include discussions about driving" »

This is the year when everyone must get their estate plan in order. Don't wait another day.
Click here to Fox 17 News video

Continue reading "Estate Planning: Everyone's #1 New Year's Resolution" »

In this first week of the New Year, as estate planning attorneys, we feel compelled, if not obligated, to impress upon everyone the necessity of estate planning. Like insurance, estate planning is the protection that you need for the unforeseen circumstances of life. Like insurance, once "life happens", you can't turn back the clock and get insurance to protect yourself. The same is true with estate planning. If you don't plan while you are able, or before "life happens", you can't turn back the clock and have estate planning done to protect you, your family, and your assets.

No one likes to pay insurance premiums, just like no one is excited to pay for estate planning. However, the upfront cost, in either scenario, is almost always far less than the financial consequences of not having insurance or not having an estate plan. Make a New Year's Resolution to Give Your Estate Plan a Check Up

Continue reading "More estate planning resolutions: Don't procrastinate!" »

New Year's Resolutions

1. Have a will drafted; What is a will?
2. Name a Guardian for my minor children; What is a guardian and why do I need one?
3. Have a medical power of attorney drafted; Who needs a medical power of attorney and why?
4. Have a financial power of attorney drafted; Who needs a financial power of attorney and why?

Continue reading "Estate Planning New Year's Resolutions" »

Parents of children often put off estate planning due to the difficulty of choosing a guardian. A guardian is the person or persons named in your Will to take care of your children in the event of your death. Upon your death, the named person(s) is immediately the person who steps into your role as parent.

If you die without a will, the Probate Court will appoint a guardian for your children. The judge will make this decision without the benefit of knowing who you would have wanted to take care of your children. The judge will not have the benefit of knowing your children, their specific needs, or their relationship with the people who are petitioning the court to be appointed as their guardian.

Besides having the court choose a guardian for your children, another consideration is the uncertainty that is can cause for your children who are already in a very delicate situation. One party might take "custody" of the children until the Probate Court appoints a temporary guardian. If the temporary guardian is different from the person caring for the children, the children must adjust to a new situation. If final guardian appointed by the court is different from the temporary guardian, the children are forced to adjust to another situation.

If there is any dispute among guardians, a whole host of additional situations arise for your children. Even the most harmonious in-laws can be greatly divided by a custody battle of their orphaned grandchildren (or nieces/nephews). Family Members Battle of custody of children

Another reason parents put off choosing a guardian is that there not a clear choice of people who could assume the role. Sometimes a choice may live in another state. Sometimes spouses disagree and may want to choose someone from "their" own family and not the other. The main obstacle to overcome when choosing a guardian, is knowing that whomever you choose will not be a "perfect" replacement. Your job as parent is to pick the best replacement.

Another thing to remember is that you can easily change guardian the guardian you have named. Your original choice is not set in stone. If you pick your sister and brother-in-law and they relocate across the country, you can change your Will. If you pick your parents and they become too old or become ill, you can change your Will. If guardians that you choose become divorced, you can change your Will.

Continue reading "West Michigan Estate Planning Attorney's Guide to Choosing a Guardian" »

Probate

Most people have not heard great things about "probate". Commonly, clients say, "I need a Will so I can avoid probate." I would agree that in most cases, a client is wise to want to avoid probate and below I have listed several reasons for this opinion.
The Probate Court has been established to oversee the administration of a deceased person's estate which is within its jurisdiction. The next logical question would be: "what is in the probate court's jurisdiction?" If you die without a Will, everything that you own (in your name only) is subject to the rules of the probate court. If you die with a Will, everything that you own is subject to your designations in your Will with the oversight of the probate court. Bottom line; having only a Will doesn't not avoid probate. How to Avoid Probate

There are three main reasons that probate is not the preferred method for getting your "stuff" to the people that you want to have it.

Cost

The first reason is the cost. It is far more economical to pay for an estate plan which protects you while you're alive, protects your loved ones, protects your stuff, and carries out your wishes. The upfront cost will save you and your beneficiaries from many future costs. On an average, the fee to probate an estate is over 10% of the value of the estate. There are court costs involved. You will pay a filing fee, an inventory fee (this fee is based upon the percentage of the value of the estate), and newspaper publication fees. You may have the additional costs of appraisers, Realtors, accountants, and other professionals, including attorneys.

Time

A probate estate takes at least 4 months to administer per law. This four month period allows any creditor to make a claim against the estate. The four months does not take into consideration how long it may take to liquidate an asset, especially houses in this down market. The time it takes to administer the estate will be longer if there are heirs that are hard to locate or who fail to return paperwork. The probate court requires the person who is appointed the "Personal Representative" to complete an accounting. The accounting requires a detailed report of all the estate assets, all income, all expenses and disbursements. Every person whom the court determines to be an interested person in the estate must receive a copy of the accounting and may object to its contents. As a practitioner who has probated many estates, it is safe to say that it will take close to a year, or more, for an estate to be completely administered.

Continue reading "Probate from the West Michigan Attorney Point of View" »

You can put off laundry, fixing a faucet, and organizing the junk drawer, but you should not put off ESTATE PLANNING. Putting off the laundry may not have severe consequences, however, putting off estate planning can have long-lasting, expensive, and devastating consequences for you and your loved ones.

In our practice we hear the same reasons, over and over, for why people put off estate planning. The most common are:

1. I am too young to need estate planning;
2. I don't make or have enough money to need estate planning;
3. We can't decide on guardians for our children;
4. Estate planning is so much too think about..I will get to it; and,
5. Estate planning costs a lot of money.

I AM TOO YOUNG TO NEED ESTATE PLANNING

In our practice, we encourage all young adults to have a Medical and Financial Power of Attorney. A Medical Power of Attorney allows you to designate a patient advocate; the person who can make medical decisions for you if you are not able. By having this document, you save your family from needing to have probate court choose and appoint a guardian for you. Also, the appointed guardian will have to make medical decisions for you without knowing what your wishes may be.

I DON'T MAKE OR HAVE ENOUGH MONEY TO NEED ESTATE PLANNING.

Without an estate plan, the assets you have will be subject to distribution to your descendants according to the rules of the probate court. You want to be sure that you can control how your assets are distributed. You may want to give more to one child in your will because you have given more financial aid to a child during your life. You may want to disinherit a child. You may want to make sure that grandchildren receive a share of your estate. These wishes will not be honored according to Michigan Probate Rules. Additionally, you need to plan for medical emergencies and other unexpected life events. http://financialplan.about.com/cs/doityourself/a/WhyYouNeedWill.htm

WE CAN'T DECIDE ON GUARDIANS FOR OUR CHILDREN

If you can't decide on guardians for you children, are you willing to let a probate court judge do it for you? This is probably one of the most difficult estate planning decisions anyone has to make. A guardian is the person or persons that you choose to stand in your place, if you are unable or deceased, to care for your children. There are many factors to consider when choosing a guardian: location, marital status, religious beliefs and affiliations, whether the prospective guardian has children of their own, financial constraints, special needs of your children, and more. The decision boils down to the fact there is rarely a "perfect substitute for you", but you know your children and who could best care for them if you're not able. For your children's sake, don't leave this decision to a judge. Click here for an article about factors to use when choosing a guardian

Continue reading "Don't Put Off Estate Planning - Best Advice from Michigan Estate Planning Attorneys" »

Medicaid is a state and federally funded insurance program available to people who meet specific criteria. For most people, Medicaid planning is often overwhelming. The result can be that people wait until there is a crisis before considering planning. Waiting too long can limit their options and add stress to an already stressful situation. The best course of action is to take advantage of pre-planning opportunities while they are available and offer the most protection. Below are several factors to consider:

You don't have to give away all of you life's savings to qualify for Michigan Medicaid.

Michigan Medicaid provides the same type of care at the same facilities at a much reduced rate to the resident. At this time, Medicaid considers one month of nursing home care to cost: $6,816 and will pay up to that amount. Most nursing home patients receive financial assistance from Michigan Medicaid.

In order to receive Medicaid nursing home benefits, one does not need to be impoverished. An estate plan and implementation can preserve and protect almost any family's life savings. http://www.michigan.gov/mdch/0,1607,7-132-2943_4860-35199--,00.html

It is never too early or too late.

In most cases it is never too early. Pre-planning, while providing protection for Medicaid for later, offers protection from creditors, lawsuits, bankruptcy and divorce now. It is always prudent to determine if there are assets that should be protected now and in the future.

It is not too late to act even if a person is already in the nursing home. Current law still provides for planning techniques to preserve some assets. https://www.cms.gov/medicaideligibility/02_areyoueligible_.asp

What about giving gifts to children and grandchildren?

One of the biggest mistakes a person can make is giving gifts without knowing the consequences. Gifts are not limited to actually writing a check. For Medicaid purposes, gifts include changing title to the home or putting a child on a bank account. Often people make these types of transfers for convenience or to make things "easier". Sometimes parents put their adult children on the deed to their home so the house will go to the children when they die. Doing so, however, has major consequences when applying for Medicaid, creating a long penalty period wherein the transferor is ineligible for Medicaid benefits.

Continue reading "Medicaid and Estate Planning in Michigan" »

Durable Power of Attorney - Everybody Needs One

What is a durable power of attorney (DPOA)? It is a document in which you voluntarily designate another person (or entity) to handle all or some of your financial affairs, including property.
The legal definition, according to Michigan Statutory Law is:
700.5501 Durable power of attorney; definition.
Sec. 5501.
A durable power of attorney is a power of attorney by which a principal designates another as the principal's attorney in fact in writing and the writing contains the words "This power of attorney is not affected by the principal's subsequent disability or incapacity, or by the lapse of time", or "This power of attorney is effective upon the disability or incapacity of the principal", or similar words showing the principal's intent that the authority conferred is exercisable notwithstanding the principal's subsequent disability or incapacity and, unless the power states a termination time, notwithstanding the lapse of time since the execution of the instrument.What are the uses of a DPOA? Often a power of attorney is used when selling or purchasing a house and one person is unavailable or out-of-state and cannot sign the closing documents. The person can create a DPOA to allow their designated person, fiduciary, to execute the documents on their behalf. A DPOA allows someone to act on your behalf regarding your finances. Different circumstances could include banking, purchasing insurance, creating trusts, voting stock, filing tax returns, standing in your place in lawsuits, and much more.

Why should I have a DPOA? First, you never know when you may be incapacitated and not able to handle your financial affairs. You may require surgery and not be able to attend to your finances while you are recuperating. You may be involved in an accident or suffer from an illness which would render you unable to handle your finances. We can plan for some circumstances, so it is more prudent to have a DPOA in place. If one of the scenarios happens to you and you do not have a DPOA with a fiduciary designated, your loved ones would have to petition the probate court to appoint someone to act as your conservator. This is not a quick or inexpensive process. Have a DPOA ensures a smooth transition of authority when and if it is needed.

When do the powers begin? You choose when the powers of the fiduciary begin. The powers can be given immediately. If there is a situation where a person feels that they are not capable to handle their affairs or they do not want to handle their financial affairs, they can immediately designate someone to act on their behalf. This if often the case with elderly individuals who are not incapacitated, however, they no longer wish to handle their financial affairs. Power can also be limited to only times when you are incapacitated. The powers would begin at the time of your incapacity and end when you are no longer incapacitated.

Continue reading "Estate Planning: Durable Power of Attorney" »

From "I do" to "I don't": Don't forget about your estate plan

Before the divorce is final...

Until the ink on a divorce judgment has dried, your will, trust, or powers of attorney are still in effect, unless there is a temporary order or separate maintenance agreement stating otherwise. What does this mean? If you have a will or trust naming your spouse as the sole beneficiary and you die during the pendency of a divorce, your almost ex-spouse (AES) will inherit your estate. If you die without a will during the pendency of a divorce, again, your AES will inherit your estate. In both cases, where you would probably prefer to have your estate go to your children or family, your wishes would not be honored.

If you have named your AES as the fiduciary in your medical power of attorney, he or she will be able to make medical decisions (including terminating life support) for you if you become incapacitated. He or she can decide whether you need surgery or what course of treatment you should receive if you are incapacitated and cannot make those decisions on your own. Remember Terri Schiavo?

If you have named your spouse as the fiduciary in your financial power of attorney, he or she will be able to make decisions on your behalf as they relate to banking, insurance, lawsuits, stocks, bonds, buying and selling of assets, paying bills, attending to mail, and any and all other powers listed in your documents.

The best advice for someone considering a divorce or someone who has recently begun the divorce process it to review and revise your estate plan documents. You have the power to decide who will receive your estate and who should be able to make decisions on your behalf, you just need to use the power.

Continue reading "Estate Planning considerations before and after a divorce in Michigan" »