Michigan Estate Planning Blog

Does the Way I Title My Assets Have an Impact on My Estate?

FedWeek’s recent article entitled “How Assets Are Titled Can Make a Big Difference” discusses the different ways property may be titled, and the significance of each one.

The way in which you take title to assets can affect your estate, taxes and perhaps the disposition of the asset if a couple divorces. Many couples want assets to be titled simply in the event something happens to one, so the other spouse can take possession immediately without taxes or complications. Joint ownership may be the simplest way to meet most of these objectives. However, this can get complicated if any number of things happen, such as divorce, second marriage, children from multiple marriages, adoption and blended families of all types.

It’s critical to be educated on the different types of ownership, so you know when a change may be needed. Here are the main options:

Holding Assets in Your Own Name is simple and inexpensive. However, if you become incompetent, those assets might be mismanaged. At your death, individually owned assets may have to go through probate.

Joint Tenants with Right of Survivorship is when one co-owner dies, all assets held this way automatically pass to the survivor. One joint owner can take over if the other is incapacitated, and jointly held assets don’t go through probate.

Tenants in Common means there’s a divided interest, although none of the owners may claim to own a specific part of the property. At the death of one of the joint owners, the share owned by the deceased must pass through their will to determine ownership. The surviving joint owner doesn’t automatically own the entirety of assets.

Tenancy by the Entirety is a type of joint ownership similar to rights of survivorship for married couples. It lets spouses own property together as a single legal entity. Ownership can’t be separated, which means creditors of an individual spouse may not attach and sell the property. Only creditors of the couple may make claims against the property.

With Entity Ownership, you might create a trust, a partnership (such as a family limited partnership), or a limited liability company (LLC) to hold assets. These entities may provide protection from creditors and tax benefits.

Community Property may only be used by married couples in community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin). Each person owns an undivided interest in the entire property. When a spouse dies, the survivor automatically receives the entire interest, so there’s no need for probate. Community property can’t be controlled by a person’s will or trust.

Ask an experienced estate planning attorney to review your estate plan and how assets are titled.
Reference: FedWeek (July 27, 2022) “How Assets Are Titled Can Make a Big Difference”

Addressing Vacation Home in Another State in Estate Planning

Many families have an out-of-state cabin or vacation home that’s passed down by putting the property in a will. While that’s an option, this strategy might not make it as easy as you think for your family to inherit this home in the future.

Florida Today’s recent article entitled “Avoiding probate: What is the best option for my out-of-state vacation home?” explains the reason to look into a more comprehensive plan. While you could just leave an out-of-state vacation home in your will, you might consider protecting your loved ones from the often expensive, overwhelming and complicated process of dealing both an in-state probate and an out-of-state probate.

There are options to help avoid probate on an out-of-state vacation home that can save your family headaches in the future. Let’s take a look:

Revocable trust: This type of trust can be altered while you’re still living, especially as your assets or beneficiaries change. You can place all your assets into this trust, but at the very least, put the vacation home in the trust to avoid the property going through probate. Another benefit of a revocable trust is you could set aside money in the trust specifically for the management and upkeep of the property, and you can leave instructions on how the vacation home should be managed upon your death.

Irrevocable trust: similar to the revocable trust, assets can be put into an irrevocable trust, including your vacation home. You can leave instructions and money for the management of the vacation home. However, once an irrevocable trust is established, you can’t amend or terminate it.

Limited liability company (LLC): You can also create an LLC and list your home as an asset of the company to eliminate probate and save you or your family from the risk of losing any other assets outside of the vacation home, if sued. You can protect yourself if renting out a vacation home and the renter decides to sue. The most you could then lose is that property, rather than possibly losing any other assets. Having beneficiaries rent the home will help keep out-of-pocket expenses low for future beneficiaries. With the creation of an LLC, you’re also able to create a plan to help with the future management of the vacation home.

Transfer via a deed: When you have multiple children, issues may arise when making decisions surrounding the home. This is usually because your wishes for the management of the house are not explicitly detailed in writing.

Joint ownership: You can hold the title to the property with another that’s given the right of survivorship. However, like with the deed, this can lead to miscommunication as to how the house should be cared for and used.

Plan for the future to help make certain that the property continues to be a place where cherished memories can be made for years to come. Talk to a qualified estate planning attorney for expert legal advice for your specific situation.

Reference: Florida Today (July 2, 2022) “Avoiding probate: What is the best option for my out-of-state vacation home?”

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”

How to Protect Valuable Assets in Estate Planning

 

If you fail to take the necessary measures, you can lose your property, which might cause financial challenges when you will not be working in retirement.
Legal Reader’s recent article entitled “How to Legally Protect Your Assets” says there are different strategies you can use to protect your personal assets.
This will help you to prepare for any eventuality. Let’s look at some of them:
A Family Trust. This may be one of the best strategies to protect your personal assets. A trust will help protect your assets when you lose all your money. A family trust can also provide tax benefits to family members in lower tax brackets. However, talk to an experienced estate planning attorney before setting up the trust to make the right decisions.
Start a Company. This may be an alternative to setting up a family trust, since your property will be more secure than when operating a sole proprietorship or a partnership business. This gives you a more secure future, even when you face financial challenges. However, there are many legalities in starting a company, so talk to an attorney.
Register Your Most Valuable Assets in the Name of the Low-risk Spouse. This tactic will make it difficult for a trustee or liquidator to gain access to the property in case of bankruptcy. However, ask an attorney to help you to structure the purchase to make certain that the low-risk partner’s name appears on the legal documents. An experienced estate planning attorney can also help you access benefits, such as Social Security and Medicaid.
These laws keep changing. You might miss an opportunity of getting long-term care planning, if you keep postponing a review with an experienced estate planning attorney.
As you spend your hard-earned cash, take some time to learn how to protect what you buy. You should also use the legal strategies above to keep your property secure.
Reference: Legal Reader Jan. 26, 2022) “How to Legally Protect Your Assets”

Should a Trust Be a Component of My Estate Planning?

 

Let’s say that there’s a young father with a wife and young son, who owns a home and a Roth IRA account, with a few stock investments. On the stock investments, he’s filled out the beneficiary designation forms passing all his assets to his wife and son, should anything happen to him.
This father owns his home is joint tenancy with right of survivorship with his wife.
Does he need to set up a separate trust, if most of his assets pass through beneficiary designations?
Nj.com’s recent article entitled “Do I need a trust in case something happens to me?” says that leaving assets outright to a minor is typically a bad move. The son’s guardian and/or the court would take custody of the assets, both of which require significant court oversight and involvement.
The minor would also receive the assets upon attaining the age of majority, which in most states is age 18.
No one can tell what a young child will be like at the age of 18, especially after suffering the loss of their parents. Even if there are no significant issues, such as drug addiction or special needs, parents should think about what they’d have done with that much money at that age.
The best option is to leave assets in trust for the benefit of the minor son.
The trustee can manage and use the assets for the benefit of the young boy with limited court involvement.
The terms of the trust can also delay the point at which the assets can be distributed and ultimately paid over to the beneficiary, if at all.
For example, it’s not uncommon for a trust to stipulate that the beneficiary gets a third of the assets at 25, half of the remaining assets at 30 and the rest at age 35. However, other trusts don’t provide for such mandatory distributions and can hold the assets for the beneficiary’s lifetime, which has its advantages.
In some instances, the terms of the trust are included in a will. This creates a trust account after death, which is also called a testamentary trust.
Talk to an experienced estate planning attorney, who can assess your specific situation and provide guidance in creating an estate plan. The attorney can also make certain that trust assets are correctly titled and that beneficiary designations of retirement accounts and life insurance are correctly prepared, so the trust under the will receives those assets and not the minor individually.
Reference: nj.com (June 14, 2021) “Do I need a trust in case something happens to me?”

Should I Add that to My Will?

In general, a last will and testament is an easy and straightforward way to state who gets what when you die and designate a guardian for your minor children, if you (and your spouse) die unexpectedly.

MSN’s recent article entitled “Things you should never put in your will” explains that you can be specific about who receives what. However, attaching strings or conditions may not work because there’s no one to legally enforce the terms. If you have specific details about how a person should use their inheritance, whether they are a spendthrift or someone with special needs, a trust may be a better option because you’ll have more control, even from beyond the grave.

Keeping some assets out of your will can actually benefit your future heirs because they’ll get their inheritance faster. When you pass on, your will must be “proven” and validated in a probate court prior to distribution of your property. This process takes some time and effort, if there are issues—including something in your will that doesn’t need to be there. For example, property in a trust and payable-on-death accounts are two types of assets that can be distributed to your beneficiaries without a will.

Don’t put anything in a will that you don’t own outright. If you jointly own assets with someone, they will likely become the new owner. For example, this applies to a property acquired by married couples in community property states.

Property in a revocable living trust. This is a separate entity that you can use to distribute your assets which avoids probate. When you title property into the trust, it is subject to the trust’s rules.  Because a trust operates independently, you must avoid inconsistencies and not include anything in your will that the trust addresses.

Assets with named beneficiaries. Some financial accounts are payable-on-death or transferable-on-death. They are distributed or paid out directly to the named beneficiaries. That makes putting them in a will unnecessary (and potentially troublesome, if you’re inconsistent). However, you can add information about these assets in your letter of instruction (see below). As far as bank accounts, brokerage or investment accounts, retirement accounts and pension plans and life insurance policies, assign a beneficiary rather than putting these assets in your will.

Jointly owned property. Property you jointly own with someone else will almost always directly pass to the co-owner when you die, so do not put it in your will. A common arrangement is joint tenancy with rights of survivorship.

Other things you may not want to put in a will. Businesses can be given away in a will, but it’s not the best plan. Wills must be probated in court and that can create a rough transition after you die. Instead, work with an experienced estate planning attorney on a succession plan for your business and discuss any estate tax issues you may have as a business owner.

Adding your funeral instructions in your will isn’t optimal. This is because the family may not be able to read the will before making arrangements. Instead, leave a letter of instruction with any personal wishes and desires.

Reference: MSN (Dec. 8, 2020) “Things you should never put in your will”

Joint Ownership Risks Great Lakes Bay Region, Saginaw, MI

“Ownership” can be a tricky concept. It should come as no surprise that “joint ownership” is often doubly tricky. A recent article in Forbes reviews some of “The Perils Of Joint Ownership.” Having two people named as owners, legally dubbed “joint tenants with right of survivorship,” or “joint tenancy” for short, is quite common amongst the elderly and families after transition. Unfortunately, unless the joint owners are spouses (the most common form of joint ownership by far) it can quickly become a problematic scenario. Imagine: homes, bank accounts, and other common assets being controlled by two independent minds with independent agendas. The original article has a few examples, but an all-too-common scenario is the older relative and a younger relative owning the assets of the older relative in joint tenancy. If and when the younger relative realizes that he or she has the power to use and enjoy the joint assets, then problems are not far behind. What are some concrete concerns? The original article fleshes out three: 1. Once a person’s name is added to the title of property, it can be undone only with his or her consent. 2. Property held in joint tenancy is immediately subject to claims of each joint tenant’s creditors. 3. Joint tenancy can produce unintended results. Sometimes joint tenancy is a valid option, and even a quite beneficial one. That noted, there are other safer alternative means to reach the same ends.

Reference: Forbes (June 14, 2013) “The Perils Of Joint Ownership”

For more information, see www.jerryreiflawyer.com

 

Related articles

The Perils of Joint Tenancy Saginaw, Michigan

Joint Ownership Risks Saginaw MI

“Ownership” can be a tricky concept. It should come as no surprise that “joint ownership” is often doubly tricky.

A recent article in Forbes reviews some of “The Perils Of Joint Ownership.”

Having two people named as owners, legally dubbed “joint tenants with right of survivorship,” or “joint tenancy” for short, is quite common amongst the elderly and families after transition. Unfortunately, unless the joint owners are spouses (the most common form of joint ownership by far) it can quickly become a problematic scenario.

Imagine: homes, bank accounts, and other common assets being controlled by two independent minds with independent agendas. The original article has a few examples, but an all-too-common scenario is the older relative and a younger relative owning the assets of the older relative in joint tenancy. If and when the younger relative realizes that he or she has the power to use and enjoy the joint assets, then problems are not far behind.

What are some concrete concerns? The original article fleshes out three:

1. Once a person’s name is added to the title of property, it can be undone only with his or her consent. 
2. Property held in joint tenancy is immediately subject to claims of each joint tenant’s creditors. 
3. Joint tenancy can produce unintended results.

Sometimes joint tenancy is a valid option, and even a quite beneficial one. That noted, there are other safer alternative means to reach the same ends. 

Reference: Forbes (June 14, 2013) “The Perils Of Joint Ownership”

For more information, see www.jerryreiflawyer.com

Joint Tenancy Travails Saginaw, Michigan

Sometimes in life things that first appear simple can, well, end up rather complex. So it is with an often overused and misunderstood form of property title known by its full legal expression as “Joint Tenancy with Rights of Survivorship.” The subject of joint tenancy was taken up recently by gazette.com, the online version of The Gazette newspaper in Colorado Springs. The article is titled “Money & the Law: Joint tenancy can have unexpected consequences,” and the author notes that elderly parents commonly add an adult child as a “joint owner” on their assets. While the parents’ intentions are good (e.g., to avoid probate), they come with some significant risks. As the article notes, one risk is that of unintentionally disinheriting any children not added as joint tenants. This can cause family quarrels lasting for generations. Another problem not discussed in the article includes subjecting jointly held assets to the divorces, lawsuits, and creditors of each joint owner. In conclusion, add third parties (e.g., children and friends) as joint tenants to your assets only after consulting with your estate planning attorney. Consider it “legal dynamite” – handle with care.

Reference: The Gazette (December 16, 2012) “Money & the Law: Joint tenancy can have unexpected consequences”

For more information, see www.jerryreiflawyer.com

Joint Tenancy Travails Saginaw, Michigan

Sometimes in life things that first appear simple can, well, end up rather complex. So it is with an often overused and misunderstood form of property title known by its full legal expression as “Joint Tenancy with Rights of Survivorship.” The subject of joint tenancy was taken up recently by gazette.com, the online version of The Gazette newspaper in Colorado Springs. The article is titled “Money & the Law: Joint tenancy can have unexpected consequences,” and the author notes that elderly parents commonly add an adult child as a “joint owner” on their assets. While the parents’ intentions are good (e.g., to avoid probate), they come with some significant risks. As the article notes, one risk is that of unintentionally disinheriting any children not added as joint tenants. This can cause family quarrels lasting for generations. Another problem not discussed in the article includes subjecting jointly held assets to the divorces, lawsuits, and creditors of each joint owner. In conclusion, add third parties (e.g., children and friends) as joint tenants to your assets only after consulting with your estate planning attorney. Consider it “legal dynamite” – handle with care.

Reference: The Gazette (December 16, 2012) “Money & the Law: Joint tenancy can have unexpected consequences”

For more information, see www.jerryreiflawyer.com

 

Joint Tenancy Travails Saginaw, Michigan

Sometimes in life things that first appear simple can, well, end up rather complex. So it is with an often overused and misunderstood form of property title known by its full legal expression as “Joint Tenancy with Rights of Survivorship.” The subject of joint tenancy was taken up recently by gazette.com, the online version of The Gazette newspaper in Colorado Springs. The article is titled “Money & the Law: Joint tenancy can have unexpected consequences,” and the author notes that elderly parents commonly add an adult child as a “joint owner” on their assets. While the parents’ intentions are good (e.g., to avoid probate), they come with some significant risks. As the article notes, one risk is that of unintentionally disinheriting any children not added as joint tenants. This can cause family quarrels lasting for generations. Another problem not discussed in the article includes subjecting jointly held assets to the divorces, lawsuits, and creditors of each joint owner. In conclusion, add third parties (e.g., children and friends) as joint tenants to your assets only after consulting with your estate planning attorney. Consider it “legal dynamite” – handle with care.

Reference: The Gazette (December 16, 2012) “Money & the Law: Joint tenancy can have unexpected consequences”

For more information, see www.jerryreiflawyer.com

 

The Perils of Joint Tenancy Saginaw, Michigan

Eliminating the need for probate is a goal for many clients. Joint tenancy, a form of co-ownership, is one tool that can help achieve this goal. When one co-owner dies, his interest in the real property automatically passes to the surviving co-owner, thereby, eliminating the need for probate. Joint tenancy can, however, have its perils and must not be entered into lightly. Control Issues: By providing someone with co-ownership, you give them control of your asset. For example, if you add another person as co-owner of your home, you cannot sell or mortgage the home unless that person agrees. Creditor Issues: If creditors seek out your co-owner for outstanding debts owed, the creditors may be able to obtain part of your home or bank account held in joint tenancy. Relationship Issues: If you and your co-owner experience a falling out, the co-owner may be able to take all of the money out of the bank account. Substitute for Will Issues: Parents of several children may place one child’s name on an account and assume she will divide assets equally among all siblings. Unfortunately, this method provides no stipulations over control of the money. The surviving co-owner can do with it what she pleases, with no legal obligation. Tax Issues: Careful planning to eliminate or reduce estate taxes can be completely thwarted by a joint tenancy that passes property outright to a surviving joint owner. Long-term Care Issues: Thoughtful planning to reduce long-term care financing can also be thwarted by a joint tenancy that passes property outright to a surviving joint owner. Marriage Issues: Individual property may become marital property once it is transferred into a joint tenancy.

Joint Tenancy Travails Saginaw Michigan

Sometimes in life things that first appear simple can, well, end up rather complex. So it is with an often overused and misunderstood form of property title known by its full legal expression as “Joint Tenancy with Rights of Survivorship.” The subject of joint tenancy was taken up recently by gazette.com, the online version of The Gazette newspaper in Colorado Springs. The article is titled “Money & the Law: Joint tenancy can have unexpected consequences,” and the author notes that elderly parents commonly add an adult child as a “joint owner” on their assets. While the parents’ intentions are good (e.g., to avoid probate), they come with some significant risks. As the article notes, one risk is that of unintentionally disinheriting any children not added as joint tenants. This can cause family quarrels lasting for generations. Another problem not discussed in the article includes subjecting jointly held assets to the divorces, lawsuits, and creditors of each joint owner. In conclusion, add third parties (e.g., children and friends) as joint tenants to your assets only after consulting with your estate planning attorney. Consider it “legal dynamite” – handle with care.

Reference: The Gazette (December 16, 2012) “Money & the Law: Joint tenancy can have unexpected consequences”

For more information, go to www.jerryreiflawyer.com