Michigan Estate Planning Blog

What Information Should Be in a Will?

 

While it’s clearly more fun to plan for a baby shower than to contemplate your own mortality, making arrangements for the eventualities of life as we age—including incapacity and, yes, our own passing—does bring peace of mind. It’s necessary for everyone 18 and older, says a recent article from BestLife,

“The 10 Most Important Things to Include in Your Will, Experts Say.”
The reason is simple: if you are incapacitated and cannot speak for yourself regarding healthcare decisions or your financial life, you need someone to do so for you. This is as much a part of your estate plan as asset distribution.

Planning for incapacity includes having a Power of Attorney (POA) and possibly a lifetime or revocable trust. The POA assigns someone else to manage everyday financial matters. The Healthcare POA is used to designate someone else to make medical decisions on your behalf if you can’t do so. You’ll need to discuss these roles with the person or people being named to ensure that they are comfortable with the responsibilities. Be sure that your Healthcare POA knows your wishes regarding medical directives and will carry them out, even if they feel differently about your wishes.

Your Last Will and Testament is part of a group of documents, including the POAs mentioned above. A will is used to name an executor who administers your estate. The executor has a large task, including gathering information for all assets, filing final taxes and estate taxes, paying off debts, notifying family members and distributing assets. Your executor should be someone you trust and who has the financial acumen to take on all these tasks, as well as managing heirs who don’t always appreciate the executor’s responsibilities.

You’ll need backups for all the people in all roles. Let’s say you chose a respected friend of many years to be your executor. If they become ill or die themselves, who will oversee your estate? You need a second, or even a third, backup executor to be named in your will. The same goes for trusts. A successor trustee is necessary to be sure that your trust and its assets are in good hands.

Minor children or dependents are protected through a will that is used to name a guardian (and a backup guardian) for minor children. If no one is named, the court will decide who will raise your child(ren). Similar issues need to be addressed, such as when you would want your children to receive an inheritance—all at once or when they reach legal age. Could it be specific percentages based on age? Picking the right person and creating a plan will ensure that the children have a good life, even in your absence.

Keeping wills up to date is critical to ensuring that your wishes are followed at every stage of life. Everyone involved should know where the original copy of the will is located. Some estate planning attorneys will safeguard your will, while others recommend keeping it at home in a fire and water-proof safe. Whichever route you take, tell your executor and family members where it can be found.

Discuss the use of trusts with your estate planning attorney. Using trusts can minimize the amount of your estate needing to go through probate, which can be time-consuming and costly.

Don’t neglect your furry or feathered friends. If your lifestyle includes companion animals who are dear to you, consider who would take care of them if you became incapacitated or died. You can use a pet trust to provide assets for their care and name a caretaker, so they don’t end up in a shelter.

Avoid family battles by including your wishes for personal possessions with special meaning in your will. Family heirlooms, artwork and jewelry are among the items families fight over. Spare your family this stress by naming them in your will or gifting them while you are still living.

Digital assets have become a part of our modern lives. Suppose you leave a list of accounts, usernames, passwords and specific directions for your wishes. In that case, your executor will need to be able to manage your digital assets, including financial accounts, photos, subscriptions, airline miles, email and social media accounts.

If you wish to leave assets to a charity, you can do so in your will or make gifts before you die. Speak with your estate planning attorney about how to bequeath assets to a charity, which should be done in alignment with your overall estate plan.

Reference: BestLife (May 3, 2024) “The 10 Most Important Things to Include in Your Will, Experts Say”

Gifting During Life

As any estate planner will tell you, giving assets away to your heirs is all about how and when. There are many times to give, and many ways to do it, and every method has its own advantages depending upon the concern. A meaningful planning question now is whether it is still best to maximize your gifting strategy in life now that the lifetime maximum gift tax exemption is $5.34 million. Formerly, the primary concern was the estate tax. The strategy was to gift during life using the annual gift tax exclusion, currently $14,000 per donee per year. After all, gifting lets you incrementally slide under that onerous estate tax ceiling. Now, and with the more favorable estate and gift tax exemptions (both are a unified $5.34 million), many planning their wealth transfers are reassessing their strategies. This sentiment was captured in a recent article in The Slott Report titled “Gifting-During-Life Strategy: Does It Make Sense for YOUR Family?” Why might one elect to use lifetime gifting rather than a bequest at death? One notable concern is that gifting does not offer the “stepped-up basis” of a bequest. Then again, it may be advantageous to use a present gift to shift radical future appreciation down to the next generation. This kind of leverage can be powerful. The original article provides an even-handed analysis of the benefits and detriments of each approach. Like anything in wealth transfer planning, the unique circumstances will dictate the most favorable alternative. It is a complex dilemma worth examining. Does the gifting-during-life strategy work for your family? Do bequests make more sense? And finally, is there an even further solution necessary to accomplishing your goals? Make sure you explore your options with competent estate planning counsel.

Reference: The Slott Report (February 28, 2014) “Gifting-During-Life Strategy: Does It Make Sense for YOUR Family?”

For more information, see www.jerryreiflawyer.com

Entrepreneurs Asking For An Early Inheritance Mid-Michigan

If your parents are retiring or already retired, then likely they will need their own retirement savings to maintain their lifestyle. On the other hand, as an entrepreneur you might be on the verge of rolling out the next big thing in the marketplace. Should you ask your folks for an early inheritance? The Wall Street Journal considered this matter in an article titled “Cash-Strapped Entrepreneurs Seek Early Inheritances,” with ideas for parents and their entrepreneurial heirs alike. In an economy starting to show some signs of life, many business plans that have been mothballed are being reconsidered. As an heir, is it ok to want your inheritance now? As a parent, is it ok to give it up early? Well, yes to both. All parties concerned must be mindful of tax issues, as well as future financial needs that include planning for retirement, old age, health issues and even the rest of the estate. The original article explores the emotional aspects of this issue, too. Indeed, it can be difficult to ask for an early inheritance and, conversely, it can be difficult being asked for an early inheritance. Regardless, whether you are asking or being asked, you will need competent legal, accounting and financial counsel to guide you. You do not want the potentially competing dreams of business success and a secure retirement to turn into nightmares for all concerned.

Reference: The Wall Street Journal (August 19, 2013) “Cash-Strapped Entrepreneurs Seek Early Inheritances”

For more information, see www.jerryreiflawyer.com

 

Entrepreneurs Asking For An Early Inheritance Saginaw MI

If your parents are retiring or already retired, then likely they will need their own retirement savings to maintain their lifestyle. On the other hand, as an entrepreneur you might be on the verge of rolling out the next big thing in the marketplace. Should you ask your folks for an early inheritance? The Wall Street Journal considered this matter in an article titled “Cash-Strapped Entrepreneurs Seek Early Inheritances,” with ideas for parents and their entrepreneurial heirs alike. In an economy starting to show some signs of life, many business plans that have been mothballed are being reconsidered. As an heir, is it ok to want your inheritance now? As a parent, is it ok to give it up early? Well, yes to both. All parties concerned must be mindful of tax issues, as well as future financial needs that include planning for retirement, old age, health issues and even the rest of the estate. The original article explores the emotional aspects of this issue, too. Indeed, it can be difficult to ask for an early inheritance and, conversely, it can be difficult being asked for an early inheritance. Regardless, whether you are asking or being asked, you will need competent legal, accounting and financial counsel to guide you. You do not want the potentially competing dreams of business success and a secure retirement to turn into nightmares for all concerned.

Reference: The Wall Street Journal (August 19, 2013) “Cash-Strapped Entrepreneurs Seek Early Inheritances”

For more information, see www.jerryreiflawyer.com

 

Inheriting International-Style

There has been a recent spate of news regarding foreign accounts and foreign taxation, even in expatriation and becoming a foreigner. However, very little has been written regarding how to accept foreign gifts and bequests. Thankfully, there is some small guidance in a recent Forbes article that I thought was worth pointing out. In many ways it’s difficult to be both an American Citizen and a Citizen of the World, but certainly one of the most punishing difficulties is the IRS itself. Of course, in an era of globalization, the intersection with international citizens and loved ones of different citizenship is all the more common. The global village also complicates the world of estate planning and with it, international wealth transfers and taxation. What if you are the recipient of a gift or an inheritor of assets from an international estate? To remain square with the IRS, you’ll want to file a Form 3520 with the IRS and affirm the recently received assets for what they are – foreign gifts or bequests and not taxable income. As gleaned from the original article, you’ll want to file a Form 3520 if: You receive either of the following during the tax year: 1. More than $100,000 from a nonresident alien individual or a foreign estate (including foreign persons related to that nonresident alien individual or foreign estate) that you treated as gifts or bequests; or 2. More than $14,375 from foreign corporations or foreign partnerships (including foreign persons related to such foreign corporations or foreign partnerships) that you treated as gifts. But do not tarry! If you delay filing the Form 3520 when required, then expect penalties to apply.

Reference: Forbes (January 27, 2012) “How To Report Foreign Gifts And Bequests To IRS”