Michigan Estate Planning Blog

What Is a Power of Attorney?

 

Nj.com’s recent article entitled “What does becoming someone’s ‘power of attorney’ mean?” explains that a power of attorney (POA) is a legal document through which a principal states that his or her trusted agent may act on his or her behalf and for their benefit.

A power of attorney is usually centered on addressing the principal’s financial matters, such as banking, paying taxes and selling or buying property.

There is also what is known as a medical power of attorney or living will. This is a legal document through which a principal authorizes an agent to make medical decisions for him or her, when they’re incapable of making the decisions for themselves.

In either event, the agent doesn’t become personally responsible for the financial expenses incurred by the principal, unless the agent agrees to take such responsibility in his/her individual capacity.

It is, therefore, important to execute documents as an agent and indicate you’re doing so as an agent.

For example, you, Jim Smith, would sign for principal Mary Smith as follows: “Mary Smith, by Jim Smith, attorney-in-fact,” or “Jim Smith, as agent for Mary Smith, under power of attorney.”

When signing a contract with respect to nursing home care, be wary of agreeing to individually be the “responsible party.” That term may be defined to assign additional obligations, meaning being responsible for the bill.

Remember to sign everything as agent under the power of attorney.

Reference: nj.com (April 12, 2022) “What does becoming someone’s ‘power of attorney’ mean?”

 

Why Is Communication Important in Estate Planning?

 

Successful transition of wealth from generation to generation is best accomplished when family members have a shared understanding of the overall use of the family wealth. While the initial wealth creators have final say about how their assets are distributed, awareness and agreement on the part of the receiving family members regarding how the wealth is used can help preserve assets as they move to the next generation.

Forbes’ recent article entitled “Communication Can Be The Key To Creating Harmony In Multi-Generational Estate Planning” says that coming to an agreement can sometimes be difficult, especially if family members bring their own perspectives and values to the estate planning process. However, good communication can help head off potential multi-generational conflicts before they happen.

One of the most significant challenges in achieving multi-generational wealth preservation is that each individual and generation has a different outlook on wealth. Today’s families could include four or even five generations. This big gap in ages could mean differing perspectives on many topics, including:

1) Personal values. Family members may have different belief systems and values, including how they view work, social and political systems, relationships, and other topics.

2) Investing priorities. Some generations may give greater importance to socially conscious investing than others. This could create a conflict when it comes to how and where to invest.

3) Shifting economic environments. Older generations who have lived through various economic scenarios may have very different perspectives than younger generations, particularly those just coming of age in a time of high inflation and a slowing economy.

4)  Communication. Not every generation or family member is comfortable talking openly about money, especially when it comes to sharing how much is involved and how to spend it.

5)  View of the role of a financial advisor. Some family members may see a financial advisor as a trusted partner, and others may be more skeptical.

 

While these differences can create challenges in the estate planning process, you can resolve them and reach an agreement about how to best manage the family’s wealth. Begin with a plan designed for the long-term, spanning current and future generations that’s flexible to meet the family’s changing needs and shifting economic environments.

Reference: Forbes (April 18, 2022) “Communication Can Be The Key To Creating Harmony In Multi-Generational Estate Planning”

What Do I Need to Know about Wills?

 

Some people mistakenly think that not having a will enables their assets to bypass the time and expense of probate.
That’s 100% not true–if you die without a will, your property still must go through probate when there is no surviving joint owner or designated beneficiary, says FedWeek’s recent article entitled “Expressing Your Will with a Will.”
You really should have a will.
If probate avoidance is a concern, you can create a trust. By using a revocable trust, you can retain control over the trust assets while you are alive.
The assets placed in trust during your lifetime can be distributed at your death, under the instructions of the trust, without going through probate.
After you draft a will, do not forget about it.
Significant life events, like births, deaths, marriages and divorces, all may raise the need to revisit your last wishes.
After each change, be certain that your current will is both safe and accessible.
One way to do this is to leave your will with your executor, especially if you name a financial institution rather than an individual.
If you decide to keep your will somewhere else, your executor and other loved ones should know where it is.
The estate planning attorney who prepared your will should have a copy, as well as a memo stating the location of the original.
Regardless of where you put your will, you should have another document for your funeral and burial instructions.
Wills are typically not read until days or weeks after death, so it will not help your family make decisions about a funeral or a memorial service.
As a result, a separate letter should be drafted to state your final wishes. Your executor should know where these instructions can be located.
Reference: FedWeek (Feb. 22, 2022) “Expressing Your Will with a Will”

How to Get Started on an Estate Plan

 

CNBC’s recent article entitled “67% of Americans have no estate plan, survey finds. Here’s how to get started on one” reports that just a third of Americans have put these plans in place, according to a new survey from senior living referral service Caring.com.
That means that 67% are leaving what happens to them and their assets in case of disability or death up to others, including the state.
What is the biggest reason why they don’t have an estate plan? They just have not gotten around to it, according to 40% of survey respondents.
Meanwhile, 33% say they do not have enough assets to pass on to their loved ones, 13% said the estate-planning process is too costly. A total of 12% said they do not know how to get a will.
Those who have had a serious case of COVID-19 are 66% more likely to engage in estate planning compared to those who have not, according to Caring.com. About 41% of those ages 18 to 34 now see greater need for a will or other estate-planning documents following the onset of the pandemic.
Of course, there’s room for improvement, said Jim Rosenthal, CEO of Caring.com, noting only 48% of people who had a severe case of Covid have an estate plan in place.
“Even with the big scare of potential impending death, people still don’t run out and take care of what’s not that challenging to take care of,” Rosenthal said.
You should know that you do not need to have a lot of assets to decide where you want the assets you do have to go when you die, or to stipulate your preferences for your end-of-life or other care should you become incapacitated.
The first step is to become as educated as you can and consider consulting an experienced estate planning attorney. Call today to schedule your free consultation and have your questions answered- (989) 790-1461
Reference: CNBC (April 11, 2022) “67% of Americans have no estate plan, survey finds.

Should an Estate Plan Include a Cabin on the Lake?

 

If you don’t plan appropriately and thoughtfully, problems may arise with respect to this property and your family when you are gone, says Kiplinger’s recent article entitled “Your Vacation Home Needs an Estate Plan!”
Speaking with your spouse and children is a good first step to help determine interest in retaining the property for the next generation and financial ability to maintain it. Let’s look at three ways you can plan for your vacation home.
Leave a Vacation Home to Children Outright During Life or at Death. An outright transfer of the home via a deed to children is the easiest way to transfer a vacation home.

However, if your children all own the property equally, they all have an equal say as to its use and management.
As a result, all decisions require unanimous agreement, which can prove challenging and be ripe for disagreement. Suggest that they create a Use and Maintenance Agreement to determine the terms and rules for the property usage. The contract would require all children to agree.
Form a Limited Liability Company (LLC). This is a tool often used by families, where each family member has a certain amount of membership interests in a home or to give away a home in a controlled manner. The operating agreement states the rules for governing the use and management of the property.
Put the Vacation Home in a Trust. A trust is another way to help with the ownership and transfer of vacation homes. Ask an experienced estate planning attorney about how this might work for your family.
Planning for your family’s vacation property is important to help avoid litigation and maintain family peace.
Addressing how the property will be paid for and setting aside money for it—as well as selecting the right structure for your family to use and enjoy the property—will help avoid issues in the future.
Reference: Kiplinger (Feb. 1, 2022) “Your Vacation Home Needs an Estate Plan!”

When Should I Think About Business Succession?

 

The pandemic has made many business owners rethink their business succession and retirement planning. Insurance News Net’s recent article entitled “Succession Planning For Business Owners: More Important Than Ever” reports that according to PwC’s 2021 US Family Business Survey, only a third of US family businesses have a robust, documented and communicated succession plan in place.
If you wait too long, you may not have the right people in place to run the business. It also restricts the tax planning options for the business and your personal estate. Either error can cause a business to fail, when it passes from one generation to the next.
An exit that is too sudden or without direction can leave a vacuum at the top and damage relationships with existing clients and customers. With clear objectives, a sense of urgency and an experienced estate planning attorney, you can help ensure that your business, and your future, are secure.
There are a number of areas of transition that should be addressed:
Founder Transition: Determine how long you plan to stay with the business, and what your retirement plans are;
Family Transition: If you plan to leave your business to your children, determine the way in which the roles and power relationships will change;
Business Transition: How will the company’s operations and customer relations be maintained through other transitions;
Management Transition: Decide who will make up the new management team, such as family, non-family, or both, and how new leadership will be evaluated. You should also map out the schedule for transferring control of day to day decisions;
Ownership Transition: Determine how ownership is to be transferred; and
Estate Transition: see how you will coordinate your estate plan to ensure that the other transitions above occur as planned.
Many of these transitions will be accomplished through formal documentation, such as an operating agreement, buy-sell agreements and trusts. Sit down with an attorney soon rather than later to sort this out.
Reference: Insurance News Net (December 30, 2021) “Succession Planning For Business Owners: More Important Than Ever”

Organize Your Important Papers and Get Personal and Financial Affairs in Order

 

Organizing your important papers and getting your personal and financial affairs in order is a wise move and wonderful gift to your family. The Daily Journal’s recent article entitled “How to get your affairs in order” says to collect your important personal, financial and legal information. Here is a list of areas on which to focus:
Contacts: Make a list of names and phone numbers of close friends, doctors, lawyers, accountants, brokers and insurance agents.
Medical information: Include a list of medications you take, along with any allergies and illnesses.
Personal documents: These are things like your birth certificate, Social Security card, marriage license, tax records and military discharge papers.
Digital assets: List your digital assets, including everything from social media accounts to online banking accounts to home utilities you manage online. It should include usernames and passwords.
Pets: If you have a pet, give instructions for their care.
End of life: Indicate your wishes for organ and tissue donation and state your funeral instructions. If you have made pre-arrangements with a funeral home, include a copy of the agreement, the contact information and if it is prepaid.
Will and trusts: Include the original copy of your will and other estate planning documents.
Advance health care directives: A living will and medical power of attorney state your wishes as to your end-of-life medical treatment, when you can no longer make decisions for yourself.
Financial accounts: List your bank accounts, brokerage and mutual fund accounts and any other financial assets.
Debts and liabilities: State any loans, leases or debts you have — mortgages owed, car loans, student loans, medical bills, credit card debts, along with a list of all credit and charge cards, including the card numbers and contact information.
Company benefits: List any retirement plans, pensions, or health benefits from your current or former employer, including the contact information of the benefits administrator.
Insurance: List the policies you own, such as life, long-term care, home, auto, Medicare, Medigap and prescription drugs. Add policy numbers, agents and contact info numbers.
Property: Note your real estate, vehicles and other properties you own, rent, or lease and include documents, such as deeds, titles and loan or lease agreements.
Gather all your organized information and files in a convenient location, like a fireproof filing cabinet or safe in your home. Review and update it every year, and do not forget to tell your loved ones where it is located.
Reference: Daily Journal (Jan. 6, 2022) “How to get your affairs in order”

How Do I Avoid Probate?

 

Probate can tie up the estate for months and be an added expense. Some states have a streamlined process for less valuable estates, but probate still has delays, extra expense and work for the estate administrator. A probated estate is also a public record anyone can review.
Forbes’ recent article entitled “7 Ways To Avoid Probate Without A Living Trust” says that avoiding probate often is a big estate planning goal. You can structure the estate so that all or most of it passes to your loved ones without this process.
A living trust is the most well-known way to avoid probate. However, retirement accounts, such as IRAs and 401(k)s, avoid probate. The beneficiary designation on file with the account administrator or trustee determines who inherits them. Likewise, life insurance benefits and annuities are distributed to the beneficiaries named in the contract.
Joint accounts and joint title are ways to avoid probate. Married couples can own real estate or financial accounts through joint tenancy with right of survivorship. The surviving spouse automatically takes full title after the other spouse passes away. Non-spouses also can establish joint title, like when a senior creates a joint account with an adult child at a financial institution. The child will automatically inherit the account when the parent passes away without probate. If the parent cannot manage his or her affairs at some point, the child can manage the finances without the need for a power of attorney.
Note that all joint owners have equal rights to the property. A joint owner can take withdrawals without the consent of the other. Once joint title is established you cannot sell, give or dispose of the property without the consent of the other joint owner.
A transfer on death provision (TOD) is another vehicle to avoid probate. You might come across the traditional term Totten trust, which is another name for a TOD or POD account (but there is no trust involved). After the original owner passes away, the TOD account is transferred to the beneficiary or changed to his or her name, once the financial institution gets the death certificate.
You can name multiple beneficiaries and specify the percentage of the account each will inherit. However, beneficiaries under a TOD have no rights in or access to the account while the owner is alive.
Reference: Forbes (March 28, 2022) “7 Ways To Avoid Probate Without A Living Trust”

Is Estate Planning Affected by Property in Two States?

 

Cleveland Jewish News’ recent article titled “Use attorney when considering multi-state estate plan” says that if a person owns real estate or other tangible property (like a boat) in another state, they should think about creating a trust that can hold all their real estate. You don’t need one for each state. You can assign or deed their property to the trust, no matter where the property is located.
Some inherited assets require taxes be paid by the inheritors. Those taxes are determined by the laws of the state in which the asset is located.
A big mistake that people frequently make is not creating a trust. When a person fails to do this, their assets will go to probate. Some other common errors include improperly titling the property in their trust or failing to fund the trust. When those things occur, ancillary probate is required. This means a probate estate needs to be opened in the other state. As a result, there may be two probate estates going on in two different states, which can mean twice the work and expense, as well as twice the stress.
Having two estates going through probate simultaneously in two different states can delay the time it takes to close the probate estate.
There are some other options besides using a trust to avoid filing an ancillary estate. Most states let an estate holder file a “transfer on death affidavit,” also known as a “transfer on death deed” or “beneficiary deed” when the asset is real estate. This permits property to go directly to a beneficiary without needing to go through probate.
A real estate owner may also avoid probate by appointing a co-owner with survivorship rights on the deed. Do not attempt this without consulting an attorney.
If you have real estate, like a second home, in another state (and) you die owning that individually, you’re going to have to probate that in the state where it’s located. It is usually best to avoid probate in multiple jurisdictions, and also to avoid probate altogether.
A co-owner with survivorship is an option for avoiding probate. If there’s no surviving spouse, or after the first one dies, you could transfer the estate to their revocable trust.
Each state has different requirements. If you’re going to move to another state or have property in another state, you should consult with a local estate planning attorney.
Reference: Cleveland Jewish News (March 21, 2022) “Use attorney when considering multi-state estate plan”

What Should I Leave Out of My Will?

 

Let’s look at what shouldn’t be in a will, according to Best Life’s recent article titled “Never Include These 2 Things in Your Will, Experts Warn.”
1. Never include a conditional gift in your will. A conditional gift is when money or property is given only when and if a specific event takes place. For instance, grandpa might leave a conditional gift for his grandchild, if she graduates college or gets married. These provisions are often drafted in the hopes of encouraging or discouraging certain behaviors and have a tendency to get messy.
Even the seemingly basic condition of graduating from college can turn into a major issue, if the beneficiary decides to pursue the trades or accelerates in college and is offered an excellent job before earning her degree.
Similar obstacles—and, frequently, creative workarounds from beneficiaries who want to unlock their inheritance—will also be encountered with other conditional gifts. However, there are still ways to achieve the spirit of the conditional gift without it getting complicated. Instead, give the bequest outright without any conditions but include the encouragement that the beneficiary does something specific.
Another option is to hold the gift in a trust for a beneficiary. With a trust you can designate a trustee to be in control of the assets in the trusty after your death. The trustee will have discretion as to the timing and amount of distributions. You can also detail how narrow or broad that discretion should be.
2. Be careful with dollar amount bequests. The second thing you should never include in your will is a dollar amount bequest.
While this might seem common, it's not recommended. This also has the potential to create major conflict within a family.
A better option is to use percentages. In this way, your estate will self-correct for size and each beneficiary will get their proper share.
Every will is specific to the person who creates it. In order to ensure that yours is done properly, meet with an experienced estate planning attorney to create a will that benefits you and your loved ones—without any unexpected problems.
Reference: Best Life (March 20, 2022) “Never Include These 2 Things in Your Will, Experts Warn”