Michigan Estate Planning Blog

Wealth Protection Through Estate Planning

 

Without a well-prepared estate plan, wealth can be lost to taxes, administrative costs, or disputes among heirs, both in and out of court. With an up-to-date estate plan, changes to tax laws are proactively addressed and wealth can be protected and passed across generations. A recent article appearing in Medical Economics, “Estate planning is your first line of defense against wealth loss—Here’s what you should know,” explains how an estate plan creates a framework to minimize taxes, avoid the costs and complications of probate and ensures that your wishes for your estate are followed.

Documenting assets is one task that is done when creating an estate plan. When records are not clear, transferring assets can become complicated. A comprehensive record-keeping system can store documents like deeds, life insurance policies, asset inventories, family videos and photographs online.

Many financial records are already online through client portals by major financial companies. The key to incorporating these records into an estate plan is remembering where all the information is stored and being willing to share access information with a trusted family member or friend. The person you name as an executor of your will or a trustee for a trust is the most likely candidate to be provided with this information.

There are many steps to having a solid estate plan. However, there are also many missteps. Here are some of the most common pitfalls to avoid:

Failing to update an estate plan. All the documents in your estate plan, including a Will, Power of Attorney, Healthcare Proxy, HIPAA Release Form, Trusts, Advanced Directives and more, must be updated to comply with changing laws and changes in your life.

Making a careless decision about the executor or trustee can be disastrous. The eldest child does not have to be the one to be in charge of your estate. Neither does the person you love if their life is a trainwreck. The person to be named executor and/or trustee needs to be someone you know to be extremely responsible, reliable, good with money management and a solid moral compass.

Digital assets are often ignored when it comes to estate planning. However, this new asset class needs to be included. If you have email, you have a digital asset. You have digital assets if you have email, cryptocurrency, websites, social media content, online subscriptions and photos stored in the cloud. Suppose no plan is made to create an inventory of accounts and name a digital executor. In that case, your estate becomes vulnerable to identity theft, valuable cryptocurrency could be lost forever and there may be nothing your loved ones can do.

Most family fights have to do with unequal asset distribution after the death of a parent. A clear estate plan is one way to preclude confusion about what you want to happen after death. Talking about your estate plan while you’re still able to have these uncomfortable discussions is one way to help establish your wishes. You may want to create a Letter of Intent or make a video to express your reasons for making certain decisions. This may not be legally enforceable. However, it will serve to document your wishes.

Estate planning is not just about distributing assets after death. By establishing an estate plan, the family is better prepared to deal with the loss of a loved one and can focus on healing together instead of battling over their inheritance.

Reference: Medical Economics (Oct. 17, 2024) “Estate planning is your first line of defense against wealth loss—Here’s what you should know”

Life Insurance Donations: Two Birds With One Stone

Life insurance can be an incredible boon to your family, and a buffer against a dozen high-cost issues or a source of much-needed liquidity in the face of an estate tax. Then again, you might just end up not needing it all. What do you do with the policy? The good news is that you can kill two birds with one stone. Have you thought about donating your life insurance to a worthy cause? WealthManagement.com explained the motive and the usefulness of the approach a short time ago in a recent article titled “Donating Life Insurance.” What if it turns out that you won’t need that life insurance policy for which you scrimped to pay premiums over the years? Your children are grown and on their own, plus you have built up enough wealth to carry you and your spouse through retirement. Perhaps you have forgotten about that old policy sold to you by a college buddy when he was just getting into the business. In short, the policy is “found money” you really do not need now. Consider this: your favorite charity could make good use of your policy and its eventual proceeds. Charities in the know are far more amenable to such unique gifts than you might realize. Now, instead of the eventual proceed being a potential tax burden to your estate, you can claim a current charitable deduction. Two birds with one stone. Be sure to read the original article for more of the particulars. Then, before taking action, schedule a consultation with your estate planning attorney to make sure you connect all of the dots and get the best benefit while doing the most good.

Reference: WealthManagement.com (March 18, 2014) “Donating Life Insurance”

For more information, see www.jerryreiflawyer.com

 

Filling in the (Estate Planning) Gaps with a Letter of Intent

Your estate and your plan for it are more than just a set of documents. Nevertheless, it is only through documents that you and your wishes truly get a voice. There are the legal documents that speak to the court, but that does not necessarily do all of the speaking you need it to. When you need to leave that much more instruction behind there is an important tool to be found in the Letter of Intent. A “Letter of Intent,” not unlike the business version used in and around business transactions, is not the document that does the legal heavy lifting but it can move things along. So, too, with letters of intent which are meant to supplement and complement a will or trust arrangement, but never to do the work standing alone. LifeHealthPro offered some important perspective on the Letter of Intent in a recent article with some special attention to planning for special needs children and it is worth your thoughts: “Letter of intent: a useful component of an estate plan.” If the will tells the probate court what you want to do with your assets, the Letter of Intent gives you the voice to say the same for all of the other topics, from your hopes and wishes to very practical instruction regarding this or that. If you have a child with special needs, then a Letter of Intent can give you the space to offer all manners of practical instruction that simply cannot fit within a will and may be inappropriate for a legal document in the first place. That is the rub, of course. The Letter of Intent is not the will and is not legally binding. For a bit more on the Letter of Intent as a tool and for a great deal more advice on how to use it, particularly with regard to children with special needs, check out the original article. Sometimes this little letter can mean all of the difference. In any event, it might help you and your loved ones organize your thoughts. In the end, however, if your objectives require that some essential legal concerns are addressed, then the heavy lifting needs to be done in properly drawn legal documents. So what are your needs and how will you put them to paper?

Reference: LifeHealthPro (June 3, 3014) “Letter of intent: a useful component of an estate plan”