Michigan Estate Planning Blog

What Is Probate Court?

Probate court is a part of the court system that oversees the execution of wills, as well as the handling of estates, conservatorships and guardianships. This court also is responsible for the commitment of a person with psychiatric disabilities to institutions designed to help them.

Investopedia’s recent article entitled “What Is Probate Court?” also explains that the probate court makes sure all debts owed are paid and that assets are distributed properly. The court oversees and usually must approve the actions of the executor appointed to handle these matters. If a will is contested, the probate court is responsible for ruling on the authenticity of the document and the cognitive stability of the person who signed it. If no will exists, the court also decides who receives the decedent's assets, based on the laws of the state.

Each state has rules for probate and probate courts. Some states use the term “surrogate’s court”, “orphan’s court”, or “chancery court.”

Probate is usually required for property titled only in the name of the person who passes away. For example, this might include a family home that was owned jointly by a married couple after the surviving spouse dies. However, there are assets that don't require probate.

Here are some of the assets that don't need to be probated:
IRA or 401(k) retirement accounts with designated beneficiaries
Life insurance policies with designated beneficiaries
Pension plan distributions
Living trust assets
Payable-on-death (POD) bank account funds
Transfer-on-death (TOD) assets
Wages, salary, or commissions owed to the deceased (up to allowable limit)
Vehicles intended for immediate family (under state law); and
Household goods and other items intended for immediate family (under state law).

Investopedia (Sep. 21, 2022) “What Is Probate Court?”

Major Blunders in Estate Planning

Kiplinger’s recent article entitled “5 Common Estate Planning Mistakes to Avoid” warns that if you overlook an important step or make a misstep in your estate planning, everything could be undone. You could instead burden your family with a challenging and headache-inducing estate.

There are many ways to get things wrong. Let’s look at a few:

1. Not preparing for incapacity. The main reason to create a will is because we know that some day we’ll pass away. A will lets your family know how to distribute your property and other assets. A well-thought-out estate plan should identify the people authorized to make important decisions on your behalf regarding finances, health care and other critical matters. This is accomplished with powers of attorney. Once you are unconscious or afflicted with dementia, it will be too late. Make a list of decision-makers now, inform them of your wishes and create the necessary powers of attorney
2. Failing to include funeral and burial wishes. If you can purchase a burial plot and make funeral plans, put this in your estate planning documents. If you don’t, it may mean a lot of work for your family after your death. Name someone to be in charge of the funeral and burial arrangements and make sure that person understands your wishes. If you don’t detail your wishes prior to your death, it may become an issue for your loved ones.
3. Ignoring the tax implications of transferring property. As generous as it may seem to give property to your family during your lifetime, it is usually much smarter – and far more generous – to delay the transfer until you’re deceased. If you convey the deed to property to your next of kin before you die, they may see a hefty tax bill whenever they sell the same property. That’s because the basis for that property will be tagged to the date on which you made your purchase, not the date you made your gift. As a result, it could leave your heirs scrambling to pay an enormous sum that would have been averted, had they been granted the deed after your death.
4. Failing to designate backups for decision-makers. The best of plans can go south without a secondary beneficiary. This will address any unforeseen events. Name backups for your executor and other decision-makers. If they can’t fulfill their obligations, a court will name substitutes unless you’ve already planned for these contingencies.
5.  Not tracking beneficiary designations. In addition to stating the beneficiaries and their respective shares in your will, you must also communicate a directive to your bank that sets forth the interests in your account after your death. If you fail to do this, the bank’s rules will override anything you’re written in your will as to that account. That means your percentages will be different from those expressed in your will.
6. Take steps now to make certain there are no hidden issues that will haunt your family after you’ve passed.
7. Reference: Kiplinger (Oct. 17, 2022) “5 Common Estate Planning Mistakes to Avoid”

Can I Make Decisions for My 18-Year-Old ‘Kid’ If She Becomes Incapacitated?

 

The Press-Enterprise’s recent article entitled “Legal documents for young adults” describes some of the important legal and estate planning documents your “kid” (who’s now an adult) should have.

HIPAA Waiver. This form allows medical personnel to provide information to the parties you’ve named in the document. Without it, even mom would be prohibited from accessing her 19-year-old’s health information—even in an emergency. However, know that this form doesn’t authorize anyone to make decisions. For that, see Health Care Directives below.

Health Care Directive. Also known as a health care power of attorney, this authorizes someone else to make health care decisions for you and details the decisions you’d like made.

Durable Power of Attorney. Once your child turns 18, you’re no longer able to act on their behalf, make decisions for them, or enter into any kind of an agreement binding them. This can be a big concern, if your adult child becomes incapacitated. A springing durable power of attorney is a document that becomes effective only upon the incapacity of the principal (the person signing the document). It’s called a “springing” power because it springs into effect upon incapacity, rather than being effective immediately.

A durable power of attorney, whether springing or immediate, states who can make decisions for you upon your incapacity and what powers the agent has. The designated agent will typically be able to access bank accounts, pay bills, file insurance claims, engage attorneys or other professionals, and in general, act on behalf of the incapacitated person.

They’ll always be your babies, but once your child turns 18, he or she is legally an adult.

Be certain that you’ve got the legal documents in place to be there for them in case of an emergency.

Remember a spring break, when they’re home for summer after their 18th birthday, or a senior road trip are all opportunities when these documents may be needed.

Reference: The Press-Enterprise (April 2, 2022) “Legal documents for young adults”

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”

Why Is Estate Planning Review Important?

Maybe your estate plan was created when you were single, and there have been some significant changes in your life. Perhaps you got married or divorced.
You also may now be on better terms with children with whom you were once estranged.
Tax and estate laws can also change over time, requiring further updates to your planning documents.
WMUR’s recent article entitled “The 'final' estate-planning step” reminds us that change is a constant thing. With that in mind, here are some key indicators that a review is in order.
The value of your estate has changed dramatically
You or your spouse changed jobs
Changes to your income level or income needs
You are retiring and no longer working
There is a divorce or marriage in your family
There is a new child or grandchild
There is a death in the family
You (or a close family member) have become ill or incapacitated
Your parents have become dependent on you
You have formed, purchased, or sold a business;
You make significant financial transactions, such as substantial gifts, borrowing or lending money, or purchasing, leasing, or selling assets or investments
You have moved
You have purchased a vacation home or other property in another state
A designated trustee, executor, or guardian dies or changes his or her mind about serving; and
You are making changes in your insurance coverage.
Reference: WMUR (Feb. 3, 2022) “The 'final' estate-planning step”

Should I Ask Mom and Pop about Their Finances?

 

Adult children should know about their parents’ finances in case of any emergency. They should also know critical information in case of death. NASDAQ’s recent article entitled “9 Questions to Ask Aging Parents About Their Finances” acknowledges that speaking to aging parents about their finances isn’t easy. However, to start this process, the article gives us nine important topics you may want to discuss with your parents:
Do You Have a Financial Plan (and is it enough)? See if your parents have a financial plan. Some parents will have a solid financial plan that will let them to live comfortably into their 80s or 90s. On the other hand, you may discover they’re living on a fixed budget and money is tight. If you see that you’ll need to help them financially now or in the future, start planning ASAP. Any decision to provide them with financial support will likely have an effect on your own financial plan.
Do You Have an Accessible List of All Your Accounts? Ask your parents to draft a list of their financial assets and those named as beneficiaries of those accounts and keep it in a safe place. They should also put together important contacts, such as clergy, CPA, estate planning attorney, physician, etc.
Where’s Your Will, and Who’s the Executor? See where your parents keep their wills and estate documents. Some estate planning attorneys retain an original copy. If your parents don’t have a will, encourage them to see an estate attorney. An item that’s not commonly listed in the will, that you may want to ask about, is if your parents have prepaid for a burial plot or memorial arrangements.
Do You Have Life Insurance Policies that I Should Know About? See if your parents have any active life insurance policies. Get the details of the policies and the policy numbers. If your parents are still working, they may also have life insurance through an employer.
Are There Any Special Bequests to Family and Friends? Family heirlooms and special personal property may be a part of your parents’ estate plan. A sibling may have claimed your dad’s coin collection. Knowing your parents’ intentions and wishes for their keepsakes will make things much easier when they pass. Moreover, having conversations about family heirlooms now can help prevent any hard feelings later. Some people make up a list for their personal bequests and reference it in their wills.
Who Have You Named as Your Financial Power of Attorney? This document lets your parents name a primary and secondary person to make financial decisions on their behalf, if they become incapacitated. If you’re the one named as the person to make financial decisions, find out where all of your parents’ financial assets are held. You should also get information about their Medicare policy, any pensions and their Social Security benefits. It even helps to know their utility companies in case you need to pay these bills and must prove power of attorney.

Do You Have a Living Will? They should each have an advance health care directive or living will and health care power of attorney. These documents designate who has authority to make medical decisions on their behalf, if they became incapacitated or terminally ill. This also includes your parents’ preferences for life-sustaining treatment, including a “Do Not Resuscitate” clause, as well as their preferences on organ donation.
Have You Had Trouble Balancing Your Checkbook Lately or Forgotten to Pay Bills? Have a discussion about key financial decisions with your parents while they are in good health. This will let you make a plan, if they show signs of memory loss. The signs of memory loss include forgetting appointments, making occasional errors while managing household finances, or getting confused about the day of the week.
Do You Have a Long-Term Care Policy? To claim benefits of long-term care insurance, a person typically needs to be unable to perform two out of six common “activities of daily living” (bathing, dressing, toileting, eating, transferring and continence) or have a severe cognitive disorder. If your parents have a policy, access it and review its core benefits, in case you need to help them file a claim.
Discussing your parents’ financial and estate plans isn’t fun, but it will help give both you and your parents some peace of mind to know that they will be provided for, and things will be taken care of in their absence.
Reference: NASDAQ (Aug. 27, 2021) “9 Questions to Ask Aging Parents About Their Finances”

What Should Small Business Owners Know about Estate Planning?

Not having an estate plan can place business owners and entrepreneurs in jeopardy because they may face difficulties in keeping the business running, if they have to withdraw from the business at any point in time.
Legal Reader’s recent article entitled “What Small Business Owners Should Know about Doing Estate Planning” explains that estate planning is necessary to ensure business continuity. Think about who can take control when you’re no longer around to have the business continue according to your wishes contained in your estate plan. An experienced estate planning attorney can help business owners create a comprehensive estate plan, so things do not become chaotic for their family in the event of premature death or any permanent disability. Consider these steps when it comes to good estate planning for business owners.
Create an estate plan if you haven’t got one. A will is designed to detail your wishes about how you want the business to run and the manner of sharing your property at your death. A power of attorney allows an entrusted individual to undertake your business transactions and manage your finances, if you are incapacitated by injury or illness. A healthcare directive permits a trusted agent to make medical decisions on your behalf when you can’t do so yourself.
Plan for taxes. Tax planning is a major component of estate planning. Our tax laws keep changing frequently, so you have to stay in constant touch with your attorney to develop strategies for decreasing your tax liability, as well as creating a strategy for minimizing inheritance/estate taxes.
Buy life and disability insurance. Small business owners should think about purchasing life insurance, so their families can have a source of income after their death.
Create a succession plan. In addition to estate planning, a business owner should have a succession plan that specifies exactly how your company, and your family will prepare for a transition of ownership. The purpose of a well thought out succession plan is to keep the business operating or to take steps to sell it. This plan also includes the organizational structure of the business in case of maintaining business continuity.
Finally, you should keep everyone impacted by your decisions apprised of your estate plan and your business succession plan.
Reference: Legal Reader (Aug. 26, 2021) “What Small Business Owners Should Know about Doing Estate Planning”

What are Top ‘To-Dos’ in Estate Planning?

 

Spotlight News’ recent article entitled “Estate Planning To-Dos” says that with the potential for substantial changes to estate and gift tax rules under the Biden administration, this may be an opportune time to create or review our estate plan. If you are not sure where to begin, look at these to-dos for an estate plan.
See an experienced estate planning attorney to discuss your plans. The biggest estate planning mistake is having no plan whatsoever. The top triggers for estate planning conversations can be life-altering events, such as a car accident or health crisis. If you already have a plan in place, visit your estate planning attorney and keep it up to date with the changes in your life.
Draft financial and healthcare powers of attorney. Estate plans contain multiple pieces that may overlap, including long-term care plans and powers of attorney. These say who has decision-making power in the event of a medical emergency.
Draft a healthcare directive. Living wills and other advance directives are written to provide legal instructions describing your preferences for medical care, if you are unable to make decisions for yourself. Advance care planning is a process that includes quality of life decisions and palliative and hospice care.
Make a will. A will is one of the foundational aspects of estate planning, However, this is frequently the only thing people do when estate planning. A huge misconception about estate planning is that a will can oversee the distribution of all assets. A will is a necessity, but you should think about estate plans holistically—as more than just a will. For example, a modern aspect of financial planning that can be overlooked in wills and estate plans is digital assets. It is also recommended that you ask an experienced estate planning attorney about whether a trust fits into your circumstances, and to help you with the other parts of a complete estate plan.
Review beneficiary designations. Retirement plans, life insurance, pensions and annuities are independent of the will and require beneficiary designations. One of the biggest estate planning mistakes is having outdated beneficiary designations, which only supports the need to review estate plans and designated beneficiaries with an experienced estate planning attorney on a regular basis.
Reference: Spotlight News (May 19, 2021) “Estate Planning To-Dos”

What Estate Planning Documents Should I Have when I Retire?

Research shows that most retirees (53%) have a last will and testament. However, they don’t have six other crucial legal documents.

Money Talks News’ recent article entitled “6 Legal Documents Retirees Need — but Don’t Have” says in fact, in this pandemic, 30% of retirees have none of these crucial documents — not even a will — according to the 20th annual Transamerica Retirement Survey of Retirees.

In addition, the Transamerica survey found the following among retirees:

• 32% have a power of attorney or medical proxy, which allows a designated agent to make medical decisions on their behalf
• 30% have an advance directive or living will, which states their end-of-life medical preferences to health care providers
• 28% have designated a power of attorney to make financial decisions in their stead
• 19% have written funeral and burial arrangements
• 18% have filled out a Health Insurance Portability and Accountability Act (HIPAA) waiver, which allows designated people to talk to their health care and insurance providers on their behalf; and
• 11% have created a trust.

The study shows there is a big gap that retirees need to fill, if they want to be properly prepared for the end of their lives.

The coronavirus pandemic has created an even more challenging situation. Retirees can and should be taking more actions to protect their health and financial well-being. However, they may find it hard while sheltering in place.

Now more than ever, seniors may need extra motivation and support from their families and friends.

The Transamerica results shouldn’t shock anyone. That is because we have a long history of disregarding death, and very important estate planning questions. No one really wants to ponder their ultimate demise, when they can be out enjoying themselves.

However, planning your estate now will give you peace of mind. More importantly, this planning can save your heirs and loved ones a lot of headaches and stress, when you pass away.

Talk to an experienced estate planning attorney today to get your plan going.

Reference: Money Talks News (Dec. 16, 2020) “6 Legal Documents Retirees Need — but Don’t Have”

What Key Estate Planning Terms Should I Know?

Estate planning can help you accomplish several objectives, including naming guardians for minor children, choosing healthcare agents to make decisions for you should you become ill, minimizing taxes so you can give more wealth to your heirs and saying how and to whom you would like to pass your estate at death.

Emmett Messenger Index’s recent article entitled “13 Estate Planning Terms You Need to Know” provides some important terms to understand as you consider your own estate plan.

Assets: This is anything a person owns. It can include a home and other real estate, bank accounts, life insurance, investments, furniture, jewelry, collectibles, art, and clothing.

Beneficiary: This is an individual or entity (like a charity) that gets a beneficial interest in an asset, such as an estate, trust, account, or insurance policy.

Distribution: A payment in cash or asset(s) to the beneficiary who’s designated to receive it.

Estate: All of the assets and debts left by a person at death.

Fiduciary: An individual with a legal obligation or duty to act primarily for another person’s benefit, such as a trustee or agent under a power of attorney.

Funding: The process of transferring or retitling assets to a trust. Note that a living trust will only avoid probate at the trustmaker’s death if it’s fully funded. A trustmaker also may be known as a grantor, settlor, or trustor.

Incapacitated or Incompetent: The situation when a person is unable to manage her own affairs, either temporarily or permanently, and often involves a lack of mental capacity.

Inheritance: These are assets received from someone who has died.

Probate: This is the orderly court-supervised process of distributing the assets of a person who has died.

Trust: This is a fiduciary relationship where a trustmaker gives a trustee the right to hold property or assets for the benefit of another party, known as the beneficiary. The trust is a written trust agreement that directs how the trust assets will be distributed to the beneficiary.

Will: A written document with directions for disposing of a person’s assets after their death. A will is enforced by a probate court. A will can provide for the nomination of a guardian for minor children.

Reference: Emmett Messenger Index (Oct. 28, 2020) “13 Estate Planning Terms You Need to Know”

Is My Estate Plan Set with a Power of Attorney?

A June 2020 Transamerica Center for Retirement Studies survey showed that a mere 28% of retirees have a financial power of attorney (POA)—and many people don’t understand that there are two types of these advance directives that serve different purposes.

MarketWatch recently published an article “Does your estate plan use the right type of Power of Attorney for you?” that says knowing how both types work is crucial in the pandemic, especially in the event that you get sick with coronavirus.

A Durable Power of Attorney for Finance can be either “springing” or “immediate.” “Durable” refers to the fact that this Power of Attorney will endure after you have lost mental or physical capacities, whether temporary or permanent. It lists when the powers would be granted to the person of your choosing and the powers end at your death.

An “immediate” Durable Power of Attorney for Finance is effective, as soon as you sign the document. In contrast, a “springing” POA for Finance means two physicians must first examine you and confirm in writing that you can no longer manage independently.

Therefore, to begin paying your bills, your agent must have those two physicians’ letters, and he or she doesn’t automatically have the authority to ask for them.

When issues, such as doctors’ letters, are required before the agent you chose can serve you, ask your estate planning attorney for guidance.

An obstacle for a Durable Power of Attorney for Finance can come upon you very fast and possibly include you and your spouse at the same time. For example, you both might get COVID-19.

The powers granted by a typical POA for Finance are often broad and permit selling and buying assets; managing your debt, car and Social Security payments; filing your tax returns; and caring for any assets not named in a trust you may have, such as your IRA.

If you recover your capacity, your agent must turn everything back over to you when you ask.

Remember that your advance directive documents are only as good as the people who implement them. You should also make certain anyone named knows that they’ll have the job, if needed. They must know where to find your POA and all other important information.

Reference: MarketWatch (Oct. 9, 2020) “Does your estate plan use the right type of Power of Attorney for you?”

How Do You Ask Parents about Estate Planning?

How do you ask your parents about their estate planning? No matter how you slice it, it’s a touchy subject to bring up. You don’t want to come off as greedy when asking your parents about their estate planning. However, you need answers to certain questions to ensure that their financial wishes are carried out and there is a smooth transition of wealth and assets. Yahoo Finance’s recent article entitled “How To Talk to Your Parents About Their Estate Plan (Without Making It Awkward)” shows us how to approach this touchy subject and get the info that you need. Begin by asking your parents about whether they have an estate plan. You can tell them that they don’t need to share the numbers and that you just want to be able to follow their instructions. A good way to start this conversation, is to acknowledge how awkward and difficult this conversation is for you. You should emphasize that you don’t want to think about their deaths but are just trying to sort things out. Experts say that you’ll likely get a better reception from your parents, if you let the conversation happen organically and not schedule a time to talk. No matter how you approach the topic of an inheritance from your parents, the objective of the discussion is to make certain they have a plan in place, so there will be a clear path for whomever is left behind to go forward. You can start by asking if they have these key legal documents: A will A power of attorney; and A living will or health care directive. Ask where your parents keep these documents and how you can access them, if necessary. You should also ask if your parents have written funeral or burial instructions. You also need to ask them to give you other important information, so you can handle their finances if they are unable to or when they die. This includes account numbers and passwords, insurance policies, information on their retirement plan or pension administrator, as well as the contact information for their accountant, attorney, financial planner, or other financial professional. Reference: Yahoo Finance (Oct. 7, 2020) “How To Talk to Your Parents About Their Estate Plan (Without Making It Awkward)”