Michigan Estate Planning Blog

When is a Trust a Good Idea?

If you prefer to place specific conditions on your assets after you pass away, you should have a trust in place, says Kiplinger’s recent article, “Why Do I Need a Trust?”

Trusts can be especially important with second marriages, where one spouse wants to leave their assets to their children but not their stepchildren. Here are some other benefits of a trust:

Creditor Protection. If your profession has a high probability of liability, having assets transferred via a trust (once the trust becomes irrevocable) may shelter funds from being attached in a lawsuit. This can be very specific concerning state law and the type of lawsuit, so discuss this with an experienced estate planning attorney before making any decisions.

Passing Funds Outside of the Estate. For large estates that are anticipated to grow, creating trusts during your lifetime and gifting assets can remove the growth from your estate and lower future estate taxes. If your estate is higher than the exemption, and you have more funds than you need to live on, funding an irrevocable trust now is beneficial. Also, remember, revocable (or living) trusts become irrevocable on your passing, so anything in the revocable trust will be out of the beneficiary’s estate.

Providing for Grandchildren. If you want to provide for grandchildren at your death or don’t trust the parents to set inheritance funds aside for their children, creating a trust for the grandchildren is an option. If you leave assets outright to their parents, there’s no guarantee that the funds will get to them.

Protect Against Fraud or Beneficiary Changes. Seniors can be duped into updating their beneficiaries when they’re in the hospital or under hospice care. If the individual can sign a form and their signature matches what is on file at the custodian—and they have no immediate family to catch the update—this can be a problem. If the elderly person is not of sound mind, the attorney will likely be able to notice something is wrong compared to submitting a beneficiary form to a custodian directly.

Special Needs Beneficiaries. If you have incapacitated beneficiaries who require special care due to mental or physical disability, setting up a special needs trust may be a good move. A Special Needs Trust will ensure that assets can be given to this person but not interfere with government benefits or disability payments.

Ask an experienced estate planning attorney if your situation and your intentions warrant a trust. They can help you protect your assets and your wishes.

Reference: Kiplinger (August 31, 2022) “Why Do I Need a Trust?”

New Study Shows Special Needs Expenses Skyrocket

A new study in the medical journal JAMA Pediatrics reports that the total lifetime cost of supporting an individual with an ASD is $1.4 million in the U.S.—with an added intellectual disability, the total rises to $2.4 million. Reuters recently reported on this study and its findings in an article titled "Raising an Autistic Child: Coping With the Costs." These costs typically include an ongoing mix of special education programs, medical care, and lost wages as many parents of autistic children reduce their work hours or even quit their jobs to help their child full-time. The organization Autism Speaks estimates that it now takes roughly $60,000 annually to support someone with an ASD. Such costs can be so prohibitive that many affected families will move to states that offer a better collection of services. The original article advises parents not to automatically think they must drop out of the workforce to manage their child’s case full-time. It is the natural human instinct to want to do so. No one knows a child and his or her needs like a parent, and navigating the morass of city, state and federal services can be a full-time job. However, if a parent drops out of the workforce, just as out-of-pocket expenses start to mount up, it can become very challenging financially. The article urges families to take a long-term view of caregiving. In some situations it might be more advantageous for mom to stay in the workforce, and then hire additional support to provide case-management services. An attorney well-versed in special needs issues can be an indispensable aid in this area.

Reference:  Reuters (June 24, 2014)"Raising an Autistic Child: Coping With the Costs"

For more information, see www.jerryreiflawyer.com

Estate Planning With A Life Estate

Do you want to avoid probate when it comes to the transfer of your assets at death, especially when it comes to your home? Perhaps you would prefer that home to pass directly into the hands of your adult heirs. If yes, then consider using a “life estate” approach. If the concept of a life estate is new to you, then a recent article in The Wall Street Journal ought to be on your reading list. As the article titled “An Easy Way for Heirs to Inherit Your Home” explains, a life estate for real estate operates like a “payable-on-death account” for a bank account. Here is how a life estate works. First, you draw up a deed to your house naming your heirs as beneficiaries. Second, you live in the house for the rest of your life. Third and lastly, after you pass, your named heirs need only to present your death certificate to assume title to the family home. This can save time and money often associated with probate. Simple? A life estate may be too simple, depending on the circumstances. As with most things legal, things can get complicated quickly. For example, you will not be free to sell your home during your lifetime without beneficiary consent and there are tax issues to consider. Depending upon the home and your objectives, there may be better ways to transfer the family home. Regardless, a life estate is a proven transfer tool just right for the right circumstances.

Reference: The Wall Street Journal (February 9, 2014) “An Easy Way for Heirs to Inherit Your Home”

For more information, see www.jerryreiflawyer.com

Insurance – Financial Planning Foundation Saginaw, MI

To know and not to do is not yet to know. In other words, to know there is a risk, for example, and yet not to act upon that risk can leave disastrous holes in your retirement plan, your end-of-life care, or your estate itself. While it is not the only financial planning tool in the tool chest, many financial plans could benefit from an insurance to solve myriad risks. The kinds of insurances we are “required” to buy help us with the minor bumps and scrapes in life and are sometimes easy to think about, shop for or ensure that we have adequate coverage. Auto and homeowners insurance, for example, come immediately to mind. On the other hand, disability insurance, long-term care insurance and life insurance are another matter entirely. As USA Today points out in a recent article titled “Insurance is most ignored in financial planning,” these three insurances are all too often ignored, misunderstood and difficult to think about emotionally. Nevertheless, they are often essential. Insurance is, quite literally, a product you purchase to solve a risk. It is peace of mind. Without fail, insurance is more cost effective than coping with a disaster. To become disabled, especially late in life, is to lose income that may be necessary for you and your loved ones. Disability insurance can mitigate this. Likewise, with the rising costs of medical care and seeming inevitability of requiring a good deal of elder care, long-term care insurance can step in when the medical needs are overwhelming. And finally, life insurance helps eliminate the risk your family faces without you and your income. Each type of insurance is well worth your consideration, and each can be budgeted to fit within a comprehensive financial plan.

Reference: USA Today (November 10, 2013) “Insurance is most ignored in financial planning”

For more information, see www.jerryreiflawyer.com

 

Income Protection Insurance For Self-Employeds?

If you’re self-employed, then likely you know just how much the flu or even a short-term injury can set you back. If you are out of the “game” for even a short period of time, then there is a direct impact on your bottom line. There is no sick leave to fall back on, is there? What if an illness or injury were to take you out of the game for an extended period of time? You might just lose your business and, with it, your home and the rest of your assets. That is not a pretty picture, is it? Maybe it would be worth taking a look into the possibility of long-term disability insurance, but according to a recent Reuters article, long-term disability insurance is far more difficult to underwrite for the self-employed. The purpose of long-term disability insurance is to replace income that might be lost if you are incapacitated for a long period of time, or for some, at least until age 65 (when social security kicks in instead). However, the self-employed have the problem of either “being” their business, or being unable to prove the full extent of their business. If you own an actual business, rather than operate as a freelancer or individual agent, then the first case is your problem. The insurance will pay out in accordance with what it thinks you actually live on, your gross minus your business expenses (roughly what you pay income taxes on), but that just might mean cutting out necessary business costs (like licenses). While extra protection can be purchased, there is the extra expense to consider. If you are a freelancer or just work on a case to case basis, then you’ll also have to work to prove your income to the insurance underwriter. If they have trouble pinning down your actual income, then it makes it difficult for them to properly assess how much your policy would cost and how much it might offer in protection. In the end, the insurance company simply may elect not to offer coverage. At any rate, the original article is worth a look. It is, after all, an important issue to bear in mind. If you are your own boss, then plan accordingly.

Reference: Reuters (August 16, 2011) “Self-employed? How to find disability insurance”