There are many myths and misconceptions surrounding Estate Planning that I tackle on a daily basis. Since Estate Planning is most often an elective legal service, many people will wait until they feel they’re old enough or have enough money to justify the planning. I strive to educate my clients on the various ways that an Estate Plan provides benefits at every stage of life.
Here are some of the most common questions that I get:
Am I really old enough to need an Estate Plan?
Age truly isn’t an indicator in the Estate Planning field. There are many young individuals and couples who benefit from Estate Planning. The most common triggering event for younger clients is the birth of their first child. Young parents can utilize Estate Planning to provide for Guardians of their children if they become incapacitated or pass away. The custody and care of your children is not something that any parent wants to leave up to a stranger (the Probate Court Judge), or open to conflict among family members. Setting up a Living Trust is also a crucial step when you have minor children to avoid Probate Court Conservatorships for each child. If both parents pass away, the minor children cannot directly inherit their parent’s assets. Each child requires a Probate Court Guardian and Conservator until they turn 18. If you set up a Living Trust and fund your assets into the trust, your Successor Trustee can manage and protect your children’s inheritance until they turn 18 – no Probate Court involvement at all.
Do I have enough assets to set up an Estate Plan?
Too often Estate Planning is perceived as synonymous with wealth. This just isn’t the case. The types of assets you have, and sometimes the value of certain assets, may guide me in making a recommendation about the best form of planning to address your concerns and accomplish your goals. But every person, regardless of the value of their assets, will benefit from some level of Estate Planning. It’s important to understand that an Estate Plan is not just a Will or Living Trust. An Estate Plan also consists of Powers of Attorney, which are crucial to avoid Probate Court adult Guardianships and Conservatorships when you become incapacitated. So even if you feel that the value of your Estate is small, you still have other planning needs to address. On the opposite end of the spectrum, there are numerous planning options to protect and preserve the wealth you’ve accumulated and avoid taxes and complicated administrations.
What is a Will?
A Will is a set of instructions, to the Probate Court, that appoints an individual to take control of your estate (your Personal Representative) and directs the distribution of your Estate. A Will can also be used to designate Guardians for your minor children. When you have a Will, your Estate must be administered through your local Probate Court and your Personal Representative must follow all Michigan Court Rules related to this process. The Probate Administration process is public and can be lengthy. However, a Will can still be a valuable estate planning tool for many clients.
What is a Living Trust?
A Living Trust is also a set of instructions that appoints an individual to take control of your Estate (your Successor Trustee) and directs the distribution of your Estate. However, a Living Trust is a planning tool that keeps the nature and extent of your Estate private. A Living Trust avoids the publicity, length, and cost of Probate Administration by holding title or a beneficial interest in your Estate assets and containing all the necessary instructions and rules for administration.
There are a variety of available planning options with a Living Trust, including:
- Incapacity planning for yourself to protect and maintain your estate
- Providing for a professional Successor Trustee
- Planning for the care and maintenance of your pets
- Providing for charitable giving
- Specific distributions of property
- Long-term discretionary trusts for your children and/or grandchildren
- Special needs planning for children and/or grandchildren
- Distributing personal property
- Succession planning for your business
Talk to me about Powers of Attorney, Conservatorships and Guardianships…
A Durable Financial Power of Attorney is a document that allows you to appoint an individual to handle your personal financial matters if you become incapacitated. If you don’t have this document in place and you become incapacitated, the Probate Court will appoint an individual to handle your personal financial matters – a Conservator. A Healthcare Power of Attorney is a document that allows you to appoint an individual to make your medical decisions and provide for your medical care if you become incapacitated. If you don’t have this document in place and you become incapacitated, the Probate Court will appoint an individual to handle your medical decisions and provide for your medical care – a Guardian. Both of these court appointments require annual reporting and court oversight. In most cases, your loved ones will have to pay filing fees as well as fees to a Guardian Ad Litem – your legal representative.
Is Probate Administration really a big deal?
In Michigan, any amount of money can trigger probate. There is a small probate process if the value of the assets is below $24,000. But this is still a public and costly process – unnecessary red tape.
My #1 goal with clients is to avoid probate administration. Most estates will cost significantly more to administer through the Probate Court than you would spend to set up an Estate Plan ahead of time. Typical legal fees in mid-Michigan will run you about $2,500-$3,000, in addition to the Probate Court filing and inventory fees. You also lose a huge element of privacy. Almost every document that is required to be filed with the Probate Court will become public record. You are also required to file a Notice to Creditors in the newspaper.
The biggest issue families face with probate administration occurs when a loved one passes away without a Will. When this happens, the court looks to Michigan law to decide who gets what and in what proportions. This almost never plays out the way that people want and quite often results in conflict and litigation.
So why can’t I just name beneficiaries and joint owners on my assets and call it good?
Bottom line – you certainly can. That’s the beauty of Estate Planning. You can choose the level of planning to put in place! If you rely on beneficiary designations to transfer your assets when you die, you need to know and understand how those assets will pay out.
Are you naming minor beneficiaries? If so, you need to know going in that those minors will require Probate Court Conservatorships to gain access to your asset. Are you naming contingent beneficiaries? If not, your assets may still revert to your probate Estate if your named beneficiaries pass away before you. If you rely on naming joint owners on your assets, you expose yourself in ways that most people don’t realize. That joint owner with a divorce on the horizon? Your asset just became their asset for division in their divorce judgment. The joint owner with a gambling addition or creditor issues? Your asset just became fair game for collections. That one joint owner child who decides they won’t share with their siblings when you pass away? They have no legal obligation to honor your wishes…
Thank you Katrina for sharing Estate Planning information! Contact Katrina at Cornerstone Legal and discuss your plans in the event of your death. It is a scary thought – but not having your plans in place and your wishes known is even more troublesome!
And just for Greater Lansing Area Moms – Mention GLAMoms for either a free review of your existing Estate Plan or 5% off a new Estate Plan.
Content was provided by Katrina Hofstetter, Cornerstone Legal