Michigan Estate Planning Blog

What Should I Know About Living Trusts?

Roughly a fifth of Americans use living trusts as part of their estate plans. It is a sensible option for many retirees.

Motley Fool’s recent article, “What Is a Living Trust?” explains that a living trust is also known as a revocable or inter vivos trust.

It's a legal document that lets people transfer their assets into a trust while alive. In doing so, the individual, known as a grantor or settlor, can manage the trust until they die and make changes as necessary.

A living trust ensures that your assets are distributed according to your wishes after your death. It has several advantages over other methods, since it replaces a will. First, it lets your descendants or beneficiaries avoid probate court, which can be time-consuming. A living trust can also protect your and your family's privacy. A will, on the other hand, becomes a public record once it enters probate.

The revocable nature of the trust permits you to make changes as needed or even revoke it if you decide it no longer suits your needs. Finally, a living trust also makes it simple for someone else to manage your assets if you become incapacitated, avoiding the need for a court-appointed guardian or conservator.

Among the drawbacks of a living trust is requiring their own sets of record-keeping and filed tax returns. That’s because a trust is a separate financial entity from your own assets. Living trusts also have a more extended contesting period than wills, allowing beneficiaries to protest any distribution from the trust for one to five years after your death.

A living trust can help ensure that people with blended families or complicated family situations can control how their assets are distributed. For example, if you had children from a previous marriage but remarried, you'd want to ensure your spouse and your children are cared for, even if they're at odds.

Ask an experienced estate planning attorney if a living trust makes sense.

Reference: Motley Fool (July 20, 2023) “What Is a Living Trust?”

 

How to Find Out If a Person has a Will

The American Reporter’s recent article entitled “How to Find Out if Someone Has a Will” explains that if a will has been made a public record, anyone can view it. However, when the existence of a will is unknown, only immediate family members or the executor or personal representative of the estate may attempt to locate and access it.

Contact Family and Close Friends. If you want to find out if someone has a will, you can ask immediate family members and close friends. This allows you to gather crucial information and determine if a will exists.

Ask the Person’s Attorney. See if there’s any contact information, such as business cards or documents, among the person’s belongings. Explain your situation and request their assistance in locating the will. They might have kept a copy or records indicating the document's existence.

Look for Relevant Documents. While searching for a will, looking for related documents that might give you some idea of its location is essential. Start by examining the person’s files, safes, and safety deposit boxes. You can also review financial records, like bank statements and insurance policies, which might reference a will or the person’s attorney. You should also look at digital files, such as email accounts and cloud storage, for electronic copies.

Ask the Probate Court. If you’ve exhausted all other options, you may contact the probate court and explain your situation to the court clerk. However, if a will exists, it may only be available for public access after the individual’s death.

Discovering whether a person has a will is an important step in estate planning.

By contacting family members, reaching out to attorneys, searching for relevant documents and checking with the probate court, you can collect the necessary information to navigate the estate settlement process efficiently and respect the wishes of the decedent.

It’s important to know if you’re legally allowed to do this search and abide by any rules associated with the process.

Reference: The American Reporter (June 16, 2023) “How to Find Out if Someone Has a Will”

 

How to Speak With Mom and Dad About Estate Planning

 

The estate planning process typically includes making a list of your assets and debts, determining the beneficiaries of your property, and establishing a power of attorney (a person who can act on your behalf to handle your finances, healthcare, or other needs, if you become incapacitated).

The Milwaukee Journal-Sentinel’s recent article, “Five tips for having a conversation with your loved one about estate planning,” gives us some ideas to make the conversation easier.

Learn the laws. Know your state's probate laws when you talk to family members about estate planning. Some states’ laws say that if a family member dies intestate (without a will), their assets — if they have any — go directly to their children. However, this can present issues if there are no children or multiple children and no one, such as a trustee or executor, to carry out the dead loved one's wishes.

Start early. The earlier these discussions happen, the better. In many cases, people wait until they’re already sick and having problems before they even begin to think about estate planning. Involve loved ones early, so they feel invested in seeing it through and that planning will help ensure that their death does not burden the ones they love.

Keep discussions empathetic and brief. Family visits or holiday gatherings are good times to discuss estate planning. It's important to remind relatives that planning protects their wishes. Ask open-ended questions, such as, "Let’s talk about your legacy or how you would like to give back to your family or your community."

Remind your loved one they're in control — and estate planning helps them stay that way. Leaving your loved one out of the planning process can result in their wishes being misinterpreted or not represented.

Note that the person creating the will should consult an experienced estate planning attorney.

Reference: Milwaukee Journal-Sentinel (April 25, 2023) “Five tips for having a conversation with your loved one about estate planning”

What Should I Know About Estate Planning?

Estate planning is the process of making the necessary preparations to ensure that your entire estate is transferred to the intended people when you die. Estate planning is essential, and your family may suffer financially without it.

Tech Bullion’s recent article, “Six Reasons Why Estate Planning is an Essential Part of Life,” highlights why you must consider estate planning immediately.

Reducing Tax Burdens and Expenses: An estate plan can protect your assets from estate and inheritance taxes imposed by the government. By carefully planning your estate, you can minimize the tax burden and ensure that your assets are transferred to your heirs with as little taxation as possible.

Keep Control of Asset Distribution: Estate planning allows you to have the authority to choose your inheritors and that your assets are transferred to the right people. Without an estate plan, the court will distribute assets.

Keep Your Assets from Probate: An effective way to prevent conflicts within your family is by ensuring that your estate doesn’t go through probate. Estate planning approaches let assets pass directly to beneficiaries without court involvement, reducing costs, delays and potential family conflicts.

Estate Planning Can Protect Beneficiaries: Creating a plan will ensure that beneficiaries receive their rightful inheritance as you desire. A comprehensive estate plan can shield beneficiaries from potential threats like creditors or opportunistic family members who might try to exploit the situation.

To Prevents Conflict Among Families: Estate planning can prevent family fights from occurring in inheritance disputes. Establishing clear guidelines and expectations for asset distribution among beneficiaries will permit fair treatment of all family members, minimizing the likelihood of arguments or disagreements over the division of the estate in the future.
Eases the Burden on Loved Ones: Estate planning is an opportunity to leave behind invaluable instructions on how their assets should be managed and divided.

By proactively creating an estate plan, you can ensure that your family is spared from the potential hardships of lack of planning.

Reference: Tech Bullion (May 27, 2023) “Six Reasons Why Estate Planning is an Essential Part of Life”

Is an ‘I Love You Will’ a Good Idea?

 

Many married couples plan to write their wills and go with simple “I Love You Wills.” This simple last will plan can work well for many couples, but the practical impact isn’t very loving for others.

Kiplinger’s recent article, “I Love You, But Your ‘I Love You Will’ Needs to Go,” says that these types of last wills generally refer to reciprocal last wills created by spouses. In their last wills, each spouse leaves their entire estate to the other spouse outright, and then, in most cases, upon the surviving spouse’s death, the remaining assets are slated to pass to their mutual children.

These types of last wills are frequently created by those creating last wills for the first time who have simple estates and are anxious to have something in place before a significant life event (such as marriage, a first child, or taking an extended family vacation). Others who create I Love You Wills may do so because they find the process of last will creation emotionally draining or overly depressing. They want easy and simple instead of something more thoughtful that may take the help of an experienced estate planning attorney.

Here are a few challenges to consider when deciding if an I Love You Will is right for you.

Control Upon the Survivor’s Death. A major issue with an I Love You Will is that the surviving spouse can change their will after the first spouse’s death. As a result, they can easily eliminate or reduce gifts to children of the marriage in favor of a new spouse, new or stepchildren, or other beneficiaries who aren’t part of the original couple’s plan design. But with a trust for the surviving spouse upon the first spouse’s death, the originally intended beneficiaries can be “locked in.” An appointed independent trustee or co-trustee can serve alongside the surviving spouse and assess distribution decisions. Plus, it makes it harder for assets acquired during the marriage to benefit new families or for the surviving spouse to disinherit mutual children.

No Option for a ‘Primary’ Charitable Bequest. Most spouses intend to benefit their surviving spouse with most of their assets. Still, many people want to also leave something directly on their passing to a church or charity. An I Love You Will doesn’t afford this opportunity to immediately create a lasting legacy and sustain an important cause for generations.

No Incapacity Protection. Think about if—at the time of your death—your surviving spouse was incapacitated and couldn’t manage their financial affairs, including any inheritance. Most folks would prefer to have their spouse’s inheritance managed by a trusted family member they named, not someone appointed by a court. This arrangement that leaves assets outright to the surviving spouse is less protective when a trust for the surviving spouse can help ensure that assets are managed sensibly for their benefit if they cannot manage their finances independently.

Reference: Kiplinger (May 2, 2023) “I Love You, But Your ‘I Love You Will’ Needs to Go”

 

Can a Minor Be Named as a Beneficiary?

The significant exception to the rule of not naming a minor as a beneficiary is trusts: you can name a legal minor as the beneficiary of a trust. That’s important because if you want to leave assets to a minor, a trust is the way to do it.

Yahoo Finance’s recent article entitled, “Can I Name a Minor as a Beneficiary?” points out that it’s important to know that property and estate laws are highly state specific. Therefore, consult a local attorney before making any decisions regarding your money and estate planning.

Several legal documents can name someone as the beneficiary of any underlying assets. A beneficiary is the third party who receives some benefit from the document, typically in the form of financial or other property assets.

Four primary types of documents can name a beneficiary when it comes to estate planning:

Wills: In a last will and testament, a beneficiary is the person the will names to receive assets from your estate.

Life Insurance: Here, a beneficiary is an individual who receives a payment from the life insurance policy after the policyholder's death.

Retirement Accounts: A beneficiary in a retirement account is someone who receives the assets in the account after the death of the account holder.

Trusts: In a trust, a beneficiary gets assets from the account based on the terms of the trust and the trustee’s management.

Under most circumstances, a minor can’t receive assets as a beneficiary. The major exception to this is also trusts. Minors can be named as beneficiaries of a trust because the beneficiaries of a trust don’t participate in contractual or financial transactions.

Because minors cannot participate in financial transactions or handle legal matters, they can’t get assets through contracts and legal documents. They can’t directly inherit through a will, nor can they receive assets through a contract, such as a life insurance policy or a retirement account.

Reference: Yahoo Finance (June 19, 2023) “Can I Name a Minor as a Beneficiary?”

What Should We Do with an Inherited Home?

Inheriting a house with siblings can raise some financial issues about what it means for each of you. Let’s look at some options for handling this situation and possible responses to any differences of opinion that may emerge.

NASDAQ’s recent article, “What to Do When Inheriting a House With Siblings,” says that consulting with an estate planning attorney can help untangle some of the sticky issues that can arise when a home is left to multiple people.

Several siblings can inherit the same piece of property, and when siblings inherit a home, everyone’s typically entitled to an equal share of the property. So, there are a few essential things you might need to do, including:

Putting the utility services in your or your siblings' names;

Contacting the post office to have your parents' mail forwarded to your address;

Going through your parents' belongings;

Taking care of any necessary maintenance or repairs;

Updating payment information for the home's insurance policy; and

Paying any outstanding charges associated with the home, such as HOA fees or property taxes.

After that, here's what you might consider doing with the inherited property.

Sell. Selling is an obvious choice if neither you nor your siblings plan to live in it. Sell the home and divide the proceeds.

Buyout. If a sibling is reluctant to sell or your parents' wills bar you from selling, you could try to work out a buyout. In that scenario, one sibling would maintain ownership of the home and pay the others an amount equal to what their share of the home is worth. Getting the home professionally appraised to determine its value is a good idea.

Renting. A third option is to rent out the home. The upside of this option is collectively sharing in the rental income from the property. This might make sense if you think you might revisit the issue of selling or a buyout in the future or if you're obligated to keep the home in the family. If you go this route, you and your siblings will need to decide how maintenance and rent collection will be handled, and it might make sense to agree to hire a property management company to help.

Reference: NASDAQ (April 12, 2023) “What to Do When Inheriting a House With Siblings”

 

Why Do I Need an Estate Planning Attorney?

An experienced estate planning attorney provides numerous benefits because estate planning is a necessary process to help ensure that your assets are distributed as you wish after you pass away. An attorney can help you work through the complex legal and financial issues involved in estate planning and ensure your assets are protected and your family is cared for.

Digital Crime’s recent article, “The Benefits of Having a Will and Estate Planning Lawyer,” says that many folks are hesitant to plan their estates because they find the process overwhelming or don’t know where to begin. An experienced estate planning attorney can help you understand the different estate planning options available to you and counsel you through the process, making it easier and less stressful.

Another benefit of working with an estate planning lawyer is the ability to tailor your plan to meet your specific needs and goals. It’s not a one-size-fits-all process; an experienced attorney can help you design your plan to reflect your unique circumstances.

An estate planning attorney can also help you minimize taxes and other expenses associated with estate planning. That’s because the tax laws concerning estate planning are complex and challenging to navigate without professional legal help.

An experienced attorney can help you craft your estate plan to minimize tax liability and ensure that your assets are distributed efficiently and cost-effectively.

Also, a will and estate planning lawyer can help you avoid potential legal disputes and challenges to your estate plan. Estate planning documents are legal documents. As such, any errors or omissions can result in legal disputes that can be time-consuming, costly, and emotionally draining for your family. An experienced estate planning attorney will help you avoid these problems by ensuring that your estate plan is properly drafted and executed in accordance with state and federal law.

Finally, an experienced estate planning attorney can help you stay up to date with changes in the law and your circumstances.

Planning your estate can be a complex and daunting process, but working with a will and estate planning lawyer can make it easier, more efficient, and more effective.
Reference: Digital Crime (April 12, 2023) “The Benefits of Having a Will and Estate Planning Lawyer”

Should My Kids Get an Equal Inheritance?

Equal inheritances have become less common. According to research, the proportion of parents over 50 who reported treating children unequally in their wills rose from 16% to almost 35% between 1995 and 2010.
The News and Record’s recent article, “When Leaving an Unequal Inheritance Makes Sense,” says that leaving unequal inheritances can be risky. A third of Americans say their financial stability depends on receiving an inheritance, and the stakes can be high for siblings — and their parents.
It may be easier to divide your assets evenly among your beneficiaries. Still, you might feel strongly about helping an adult child who’s struggling or want to leave less to a child you’ve already financially supported. One of the most common reasons people leave unequal inheritances is to address uncompensated caregiving from an adult child. A 2018 Merrill Lynch and Age Wave study found that two-thirds of the respondents said that children who have provided care to them in their later years should receive a larger inheritance than those who didn’t.
When a child has had to compromise their lifestyle to care for a parent — such as giving up a job or working part-time instead of full-time — the parent understands the sacrifice and often wants to favor that child with the inheritance. And the Merrill Lynch and Age Wave study says many parents also feel that children who need the money most should get more. That may mean leaving less to relatively well-off kids.
While unequal inheritances are frequently designed to reward children for their help or to ensure kids are left in the best financial condition possible, fights can flare up if one sibling feels that another sibling didn’t “earn” the extra inheritance. Here are a few things that may help reduce any friction:
1. Explain your wishes. Explain what you’ve decided to leave your heirs and why before it’s too late. Include an estate planning attorney to be sure everyone understands the tax implications and liabilities associated with the assets.
2. Add a deterrent. Despite your explanation, your heirs may still not agree with your choices and decide to contest the will in probate court. You can discourage this by adding a no-contest clause stipulating, for instance, that anyone who contests the will and loses forfeits the right to any inheritance.
3. Invest in meaningful relationships. Financial need can certainly motivate a person to contest a parent’s will in court. However, emotional baggage can also have an effect. Sibling resentments can surface at the end of a parent’s life, and a larger inheritance may look like a preference for a “favored” child. The more secure children feel in their relationships with their parents, the more likely they will accept the decision to leave an unequal inheritance.
Reference: News and Record (April 13, 2023) “When Leaving an Unequal Inheritance Makes Sense”