Many people make the mistake of assuming you need a sizable estate to do an estate plan. Nothing could be further from the truth. In reality, estate planning is beneficial to anyone with an asset, particularly for people who own a house or are parents of minor children.
The attorneys at SSR Law Office are experienced in Estate Planning for people of all ages and estates. You will work with one of the attorneys to tailor an estate plan to the specific needs of your individual family. Your estate plan may include the following documents:
REVOCABLE FAMILY TRUST
A Revocable Trust is similar to a Last Will and Testament but is not the same thing. A Revocable Trust is a document that is created during your lifetime that appoints a trustee to manage your estate and directs your trustee where you want your assets to go. However, there is one major difference. Your Trust will avoid probate court; your Last Will and Testament will not!
Once your Trust is created, you will then have to transfer each of your assets into the name of your Trust by changing the ownership. This involves taking your Trust to all of your banks and having the Trust named as the owner of all accounts. Your attorney will transfer any real estate that you own into your Trust with the use of Quit Claim Deed(s). Your attorney will further discuss with you how to get your investment/retirement accounts titled and the beneficiaries updated properly.
You, or you and your spouse, will be the original Trustee(s) of your Trust as long as you are able. Upon your disability, your Successor Trustee will continue to manage your Trust assets for your benefit. When you pass away, your Successor Trustee will distribute the Trust property according to your wishes, without court involvement, which will save both time and money for your beneficiaries!
LAST WILL AND TESTAMENT
A Last Will and Testament is similar to a trust being that it is a document that instructs the probate judge where you want your assets to go and who you want to be the Personal Representative of your Estate. The difference between your Last Will and Testament is that your Trust avoids probate court involvement, while your Last Will and Testament does not.
If you have a Trust, your Will should be a “Pour-Over” Will that transfers all assets into your Trust. Understand, this is only a fall back until you have your trust fully funded. As long as your trust is funded properly, there will be no need to use your Last Will and Testament. It is in place in case an asset is later found that is not titled in the name of your trust.
Additionally, your Last Will and Testament allows you to appoint a Guardian for your minor children, make specific gifts of money, jewelry or other personal items, and instruct your Personal Representative regarding your burial preferences. However, the attorneys at SSR Law Offices feel that you should also do a separate document to designate a guardian and conservator for your minor children. This way, as long as all your assets avoid probate, there is no need to open a decedent’s estate with the court for just that.
CERTIFICATE OF TRUST
Your Certificate of Trust is a document that provides banks and financial institutions with necessary information regarding your trust. Think of it as a summary of your Trust document. It highlights the parts of the trust that financial institutions care about, such as; the name of the trust, the date, the trustee and the trustee’s powers. Most importantly, this document confirms the trustees authority to act on behalf of the trust.
When you start to fund your trust, financial institutions will either want to see a copy of your trust or a copy of the Certificate of Trust. Regardless of which they ask for, you will have both in your trust binder.
Additionally, when selling a home from your trust, depending on how old your trust is, the title company may require an updated Certificate of Trust to confirm who has authority to sell at closing. This is a very easy process; however, they will need the original for closing, so try to reach out to your attorney at least a few days in advance to ensure it will be prepared in time for you to pick it up to have for closing.
Deed to Trust or ladybird deed
Upon completing your trust, your attorney should do a quit claim deed to any real estate you own transferring it into the name of your trust. The quit claim deed can be recorded at any time; however, the attorneys at SSR Law Offices prefer to help you record your deed now to ensure that it is never lost or destroyed.
Additionally, we use Ladybird Deeds a lot in our office. A Ladybird Deed is a life estate deed that allows the owner to retain the authority to sell, mortgage or lease the property, just as they have always been able to. Immediately upon their passing, the property transfers to whomever they have named in the Ladybird Deed without the need for probate. Think of a Ladybird Deed like a beneficiary on your home.
There is also an additional benefit of the Ladybird Deed. A Ladybird Deed accomplishes what the old dresser drawer deed was meant to accomplish plus can save you money on taxes. Many attorneys used to do a Quit Claim Deed that added the children to the title of the home during Mom or Dad’s lifetime. They would tell the kids not to record the deed until after Mom or Dad passed away. The kids would then take Mom or Dad’s basis in the property, which is the original purchase price. After Mom or Dad passed away, they would record the deed and sell the property. Because it is not their primary residence, they will end up paying capital gains tax on the difference between what Mom and Dad purchased it for and what they sell it for. The Ladybird Deed, because they are inheriting the property, gives them a step-up in basis to Fair Market Value, so when they go to sell they home, they pay no capital gains tax.
Designation of Patient Advocate
A Designation of Patient Advocate is a document that allows you to appoint someone to make medical decisions for you in the event that you are incapacitated or unable, which will avoid the need for a Guardianship through the Probate Court.
This document will state whether you want to be on life support if you are terminally ill with no chance of recovery or if you are in a persistent vegetative state.
If you already have a Patient Advocate, our office offers a complimentary review to make sure that it includes the required language, such as the HIPAA Release that allows your doctor to release information to your agent without violating your privacy rights! This language is now required to be in your document; however, older documents may be missing it and need to be updated.
Durable Power of Attorney
A Durable Power of Attorney is a document that allows you to appoint someone to make financial decisions in the event you become incapacitated, which will avoid the need for a Conservatorship through the Probate Court.
The most common situations we see this document needed is selling a home or accessing a spouses IRA/401K. Additionally, this document can be used to do banking, pay bills, and deal with insurance companies.
It is important to point that this document is only as good as what it allows the agent to do. So many times our office receives calls asking if a Durable Power of Attorney is allowed to do a certain act. Our response is always, “read the document.” Each paragraph of a Durable Power of Attorney gives the agent another power. Make sure you have your document reviewed to ensure it gives your agent the appropriate powers in the future.
Funeral representative designation
A Funeral Representative Designation is a document that allows you to appoint someone to make funeral and burial decisions for you. Under the previous law, these decisions were left up to your spouse and then children. This created a lot of tension in situations where children did not agree or were estranged from the family. Now you can name anyone over the age of 18 to make these decisions for you, regardless of their relationship.
Under 700.3206, your Funeral Representative has the power to make decisions about funeral arrangements and the handling, disposition, or disinterment of a decedent’s body, including, but not limited to, decisions about cremation, and the right to retrieve from the funeral establishment and possess cremated remains of the decedent immediately after cremation.
Do not resuscitate order
A DO-NOT-RESUSCITATE Order is a form that you have the option of signing. A DNR Form states that you do not wish to have CPR performed on you in the event your heart stops or you stop breathing. CPR is a vigorous medical procedure that can break ribs and puncture lungs. Additionally, the success rate of CPR at the end of life is very low, especially on people who are terminally ill or have severe health problems.
A DNR should not be confused with the Designation of Patient Advocate Form that allows the agent to remove life support after two physicians have evaluated the individual and determined, in their opinion, that you will not wake up.
Many of our clients ask for a DNR, but in reality, just want to make sure that they will not be kept alive artificially on life support for month after month.
CASE STUDY #1: Married No Children
Robert, 48, and Linda, 45, have been married for 20 years and have no children. They have no current estate planning but a resent hospital stay for Robert has promoted them to start thinking about their planning. Their assets are as follows:
Home – owned jointly – $250,000
Savings – owned jointly – $30,000
IRA’s – each in their own individual name – $75,000 and $50,000
Life Insurance – each through their employers – $50,000 and $10,000
Both Robert and Linda are both healthy but want to designate who receives the assets upon their passing because they have no children. Their heirs-at-law are their siblings. They create a revocable trust and fund it with all their assets. Upon both of their passing, their estate passes some to their siblings, some to their children, and some to charity that they decided to designate.
CASE STUDY #2: Married with Children
Andrew, 33, and Stephanie, 31, are married with one child, who is 1 years old. There assets are as follows:
Home – owned jointly – $230,000
Savings – owned jointly – $40,000
IRA – individually – $15,000
Life Insurance – $750,000
The goal of Andrew and Stephanie’s estate plan is to protect their minor child in the event they passed away suddenly and to avoid the probate court process. We create a revocable trust and move all the assets into it. Upon their passing, everything goes to their daughter but not until she reaches the 25/30/35. This will protect her from herself and spread out her distribution so that she does not spend it all in one place.
CASE STUDY #3: Blended Families
John, 75, and Mary, 71, have been married for 42 years. John has three children and Mary has none. They have not current estate planning documents. Their assets are as follows:
Home – owned jointly – $325,000
Savings – owned jointly – $75,000
IRA – John – $750,000
Life Insurance – John – $250,000
John becomes ill and passes away in March. All assets then transfer to Mary as the surviving spouse. She joint on the house and savings account. She was also beneficiary of the IRA and Life Insurance. In July, prior to doing her own estate planning, Mary passes away. Mary has no children, her parents have both passed away, and her only sibling has passed as well. Her sibling, who was estranged, did have a son, which Mary had only met as a child. Because Mary did not have any estate planning done, upon her passing, all of the assets will now be distributed to that long lost nephew and not John’s children, even though most of the assets were his to begin with. Upon his passing they all went to Mary and will now go to her heir-at-law, her nephew. Clearly, this was not the intent of the couple. Had they done a trust or even simple Will, the assets would have been split equally between John’s children like they had intended.
CASE STUDY #4: Married Couple - Retirement - Sweet Heart Trust Plan
Edward, 84, and Sue, 82, have been married for 56 years. They have three children together. They did an estate plan years ago when they were in their early 50’s. There assets are as follows:
Home – owned by their revocable trust – $425,000
Savings – owned by their revocable trust – $400,000
Life Insurance – both – $10,000 each
Edward has many health issues. The couple is concerned about long-term care and want to pass assets on to their children upon their passing. They are afraid of having to sell their home or going through all the assets if one of them needs a nursing home. Although we use revocable trusts a lot, in this case, we are going to change from their original revocable trust to two separate revocable trusts, one for each. Each trust will mirror each other and leave all the assets to the children equally but no distribution until after the surviving spouse passes.
We then fund all the assets into Edward’s trust. Edward passes away. All the assets then stay in Edward’s trust with the children as beneficiary. If Sue then needs a nursing home, all the assets are protected with no 5 year lookback. Upon her passing, the assets will be distributed to the children.
WHAT HAPPENS IF I DO NOT HAVE AN ESTATE PLAN?
Creating an estate plan allows you to decide where your assets will go and who will be in charge of them. If you don’t create your own, Michigan law provides a ‘default estate plan’ for you. Michigan law says:
- The court will appoint a Personal Representative for your estate.
- The court will distribute your assets according to the statutory laws of “intestate succession.”
- Your heirs will receive their inheritance all at once. This is a problem for a minor, which would require a conservatorship. If receiving government benefits, the inheritance may disqualify the heir for such benefits. Finally, they may spend all of the inheritance quickly and foolishly.
- The court will appoint a Guardian to care for your minor children. Leaving that decision to the court may result in a choice you would not have made!
All of these court determinations take time and money. Additionally, you are opening up a forum for heated litigation to result among your family members. More importantly, you lose the ability to make all these very important decisions!
HOW CAN WE HELP?
Our attorneys understand that each client is different. During your strategy session, the Attorneys at SSR Law Offices will:
- Learn about your family;
- Understand your goals;
- Tailor an estate plan to best fit your individual needs;
- Help protect your family and beneficiaries, if needed;
- Ensure that your assets are passed on to the individuals you want to receive it;
- And set your estate up in a way that will allow your assets to pass to your beneficiaries without having to go through the expense and time of probate court.
Call us today at 586-239-0871 to schedule your strategy session!