Estate Planning

Background Questions and Facts

 

1.  Do you want a will written? A will is a legal document that distributes your assets that become effective only upon your death.  You may change or rewrite your will at any time.  A will does not prevent probate (see trust info below).  If you do not have a will someone must step up to act for the decedent to collect assets and distribute them through “intestate” or “intestate succession” provisions. These provide that assets will be distributed by a formula set by the state legislature. A decedent’s assets rarely go to the state.   If you do not have a will the State of Michigan has decided, for you, that your assets will be divided as follows:

 

  1. Spouse takes the entire share if there are no surviving descendants or parent.

  2. Spouse takes the first $150,000 plus 3/4 of the balance if there are no surviving descendants, but there is a surviving parent.

  3. Spouse takes the first $150,000, plus 1/2 of the balance if any of the decedent's descendants are also descendants of the spouse.

  4. Spouse takes the first $100,000, plus 1/2 of the balance if none of the decedent's surviving descendants are descendants of the spouse.  If there is no spouse…..

  5. The decedent's descendants take by representation which means per capita at each generation.

  6. If there is no surviving descendant, the decedent's parents equally if both survive or to the surviving parent.

  7. If there is no surviving descendant or parent, the descendants of the decedent's parents or of either of them by representation. 

  8. If there is no surviving descendant, parent, or descendant of a parent, but the decedent is survived by 1 or more grandparents or descendants of grandparents, 1/2 of the estate passes to the decedent's paternal grandparents equally if both survive, or to the surviving paternal grandparent, or to the descendants of the decedent's paternal grandparents or either of them if both are deceased, the descendants taking by representation; and the other 1/2 passes to the decedent's maternal relatives in the same manner.  If there is no surviving grandparent or descendant of a grandparent on either the paternal or the maternal side, the entire estate passes to the decedent's relatives on the other side in the same matter as the 1/2.

 

Note- Many people desire a will to make specific gifts, name guardians and conservators for their children and to highlight funeral choices.  For some clients, however, it may not be the most important estate planning document.

 

2.  Who do you wish to act for your estate upon your death (called a personal representative)?   If that person cannot or will not act, who would you like to be the successor or alternative?  Should your personal representative be entitled to compensation?  This person was formerly called the estate’s executor or executrix.  He or she is now known as Personal Representative for your estate.  (You may name more than one person however; you must then address how they should handle disagreements.)This person(s) should be honest because he/she will be responsible for collecting all assets and distributing them according to your wishes.  This person(s) should be organized and responsible because he/she must communicate, in a timely manner, with the probate court, any necessary agents (attorneys, accountants, real estate professionals, governmental agencies like the department of motor vehicles etc.) as well as all companies that hold your assets Finally, this person(s) should be mentally and physically able to effectively follow directions on the numerous forms and documents that would be required to collect the assets including stock power forms, real estate deeds, IRA or pension companies etc.  You may also allow the personal representative(s) to received compensation for time and expenses.  If so, he/she will be paid before other people/entities named in your will.

 

3.  Do you wish your personal representative to be required to post a bond?  If so how much?If you decide to require the personal representative to post a bond, he/she must go to a bonding agency and swear that he/she has enough personal money (or deposit a sum depending on how this section is drafted) to settle any claims in case the personal representative acts improperly concerning the assets. (“I swear I will reimburse any money that I lose or take if I breach my fiduciary duty.”) Under previous laws, the provision “nominal bond” was included.  Older wills typically require a nominal bond. A bond is not necessary under current Michigan law unless the deceased requires it in his or her will.  A bond does completely protect a beneficiary if the personal representative acts improperly and takes or loses assets.  However, it is another “hoop” to jump through prior to opening an estate thus increasing the time until beneficiaries receive their inheritance.  Most clients no longer require their personal representative to post a bond because they choose a trustworthy family member or friend to oversee their estate.

 

4.  If you have children, who would you like to care for your children (guardian) if you were to die?  Do you have an alternate?  When choosing a guardian you should consider include –maturity, patience, stamina, age, child-rearing philosophy, presence of children in the home already, interest in and relationship with your children, integrity, stability, ability to meet the physical demands of child care, presence of enough "free" time to raise children, religion or spirituality, marital or family status, potential conflicts of interest with your children, willingness to serve, political, social and moral habits and values, willingness to adopt your children.  Also, prior to naming a married couple as a guardians think about what would happen if the couple were to divorce.  If you do not name a guardian before your death, a loved one must petition the court to be appointed.  The person who petitions the court may or may not be the person you desire.  In the case of multiple people stepping forward to act as guardian, the judge decides who will act.  In addition, there are fees and time associated with petitioning the court. If something happens to you (and a child’s other parent simultaneously) a state employee will attempt to locate a family member who can take care of your child(ren) temporarily. It is always a good idea to discuss your desires with your chosen guardian so that he/she/they are aware of your preference.

 

5.  If you have children, who would you like to be responsible for your child’s assets (conservator)?  Do you have an alternate? These assets include anything they would receive if you were to die.When choosing a conservator you should consider maturity, integrity, organization, restraint and money skills.  This person must be able to make decisions in case there is a lawsuit surrounding your death (for example a wrongful death suit) and whether it would be in your child’s best interest to settle a potential suit.  Also, consider the person’s ability to manage your assets long term based on your child’s age.  If you do not name a conservator prior to your death, a loved one must petition the court to be appointed.  This may or may not be the person you desire.  Likewise, it is often the person acting as guardian.  This may or may not be desirable. In the case of multiple people stepping forward to act as conservator, the judge decides who will act.  In addition, there is potentially attorney fees and time associated with filing the petition, awaiting a hearing and the judge’s decision.

 

6.  Are there specific gifts (property or money) you would like to give to people or entities?  You may also include these in a list attached to your will which may be written/rewritten by you as necessary.These could include cash, stock, jewelry, vehicles, collectibles, pets, heirlooms, books, photographs, computers, video or audio equipment, tools etc.  It is often helpful to think of any property that you have listed separately on your homeowner’s insurance or items that you have verbally promised to individuals.  A verbal promise is difficult to prove in case a will is contested in court.  Gifts to charities and non-profit organizations should also be noted.  In the case of pets, do you want money provided for their care- in which case a pet trust may be appropriate?

 

7.  Who should receive any real property (land, houses, condo etc.)?  Do you want someone to have a “life estate” (the ability to live in/on the property for their life)? If you give a life estate, realize that your estate must be kept open and documents must be filed until the asset transfers to the person(s) named in you will.  This requires paperwork to be submitted to the court and IRS on a yearly basis.  Your personal representative would need to file these unless the property was placed in a trust.  However, a trust must file annual tax forms.  If you prefer your real property to be sold, the proceeds can be included in other provisions.

 

8.  Who should receive all other assets not listed specifically? Do you wish to forgive any debts owed to you? Who should receive your assets if these people are not alive? You may divide these assets up by percentages or specific amounts.  You may also exclude persons entirely, provided you note them in your will.  It is not necessary to give a rationale.  In addition, you may forgive debts and include these as a portion of your gift, if applicable.  You may also include charities (religious groups, animal groups, medical groups etc.) in this portion.  For all beneficiaries, please be as specific as possible to effectuate your wishes.  For example, do not just write Humane Society without noting Michigan or National.  It is best to have names and addresses for specific charities, if applicable.

 

9.  Do you want the probate court to supervise the personal representative?  Should a judge supervise all sales of property?  You may have either or supervised or unsupervised administration.  You may specify either or may allow your personal representative to decide.  A supervised administration is recommended when the will is likely to be contested, the beneficiaries have conflicting interests or if the estate is insolvent.  The personal representative or any interested party may change from unsupervised to supervised by petitioning the court but not the reverse.This is advisable if the estate administration would likely be contentious or if you suspect that the personal representative will not uphold his/her fiduciary duty.

 

10.  Do you wish to donate your organs?  Do you want your personal representative to have the ability to donate your organs for you if doctors determine your body qualifies?While this is a personal decision, I urge you to think about the following. Approximately 3,700 transplant candidates are added to the national waiting list each month. Each day, about 77 people receive organ transplants. However, 18 people die each day waiting for transplants that can't take place because of the shortage of donated organs.  There are now more than 97,500 people on the waiting list. Experts suggest that each of us could save or help as many as 50 people by being an organ and tissue donor.  If you are an organ donor and arrive in a hospital, doctors work to save your life not someone else’s.  It is unlikely the doctor who is attending to you will even know you are an organ donor.  More tests are done on a person who is an organ donor to make sure the person is dead prior to signing a death certificate than those who are not organ donors because they do not want to make a mistake. Organ donation also does not interfere with an open casket. Moreover, organs have been successfully transplanted from donors in their 70s and 80s.  And, very few medical conditions automatically disqualify you from donating organs. The decision to use an organ is based on strict medical criteria. In addition, you are not buried with thoracic, abdominal or pelvic organs if you are embalmed.  If you are unsure, I urge you to research organ donation at http://www.organdonor.gov/ and http://www.organdonor.org/ or discuss the procedures with me.  You may choose specific organs or tissues and the purposes that your organs and tissues can be used for.  As someone with friends and family as transplant recipients, I feel very strongly about this decision but I absolutely respect your opinion and desires and will not try to influence your decision :)

 

11. Do you want a Durable Power of Attorney for Financial matters written?  A Durable Power of attorney- Financial allows you to designate a person(s) who can act for you in times of incapacity (if you are in a coma, unconscious or otherwise incapable of acting for yourself).  Depending on the power you give your “agent” they could access your accounts to sell or invest assets and/or pay bills.  These can be written so that someone could act at any time or only upon your incapacity.  You may specify how incapacity is determined.  A Durable Power of Attorney – Financial ceases upon your death and a personal representative must then open a probate estate to conduct financial dealings.  Without a Durable Power of Attorney if you become incapacitated a loved one (not necessarily the person you would want) must petition the court and be appointed your conservator.  This person must then file an annual accounting with the court, potentially post an annual bond (which can be expensive) and in some cases will need to petition the court in order to sell the property.  A Durable Power of Attorney saves time and ensures that the person you desire to act for you is appointed.  You can either grant someone immediate authority or only upon your disability.  They are given documents to file with your financial institutions and must act in a fiduciary capacity including keeping an accurate accounting of all monies while acting as your agent.

 

12.  Do you want a Durable Power of Attorney for Health Care also known as a Health Care Proxy, a Health Care Advocate, an Advanced Directive or a Living Will written?  A Health Care Advocate allows you to name a person to express your wishes with respect to health care decisions if, and only if, you are incapacitated.  Depending on a number of details you desire it will allow you to express your preferences in a variety of situations (coma, vegetative state, terminal illness) and your preferences for medical and mental health treatment.  Without a Health Care Advocate your loved ones may not be able to act for you unless they are appointed a guardian by the court.  In addition, if you desire for your patient advocate to be able to refuse treatment that could sustain your life you must do so in advance. If you do not name someone to act for you, your doctor may allow someone to make decisions or a court can name someone.  However, in Michigan, it is very difficult to have your health care advocate refuse treatment that could lead to your death without your wishes being formally written.  Although hospitals have health care advocate forms, these must be signed and witnessed (by non-hospital employees) which is not always possible in cases where you are already unconscious upon arrival.  In addition, each hospital has their own version which may or may not be recognized by other institutions nor do these forms allow you to specify personal choices for special circumstances.

 

13.  Do you want a trust written?  A trust may be beneficial to some people based on specific criteria.  If all your assets are placed in a trust (an entity, like a corporation, that exists after you die), you can avoid a personal representative being required to go to a probate court and open an estate.  The successor trustee simply assumes control over all assets in the trust and can dispose or distribute them immediately.  A trust saves probate fees and time.  A trust also allows you more control over your assets upon your death.  For example, a trust allows you to control when your children receive your assets.  If you do not have a trust, all of your assets that belong to your child upon your death will transfer to them when they reach 18 years old. A trust can also allow you to structure a beneficiary’s receipt based on criteria you specify (age, college education, marriage etc.) In addition, a trust allows more privacy because it is not considered a matter of public record at court like a will.  Moreover, if you do not have a trust any assets held in your name only must go through the probate court which requires court fees and an inventory fee.  The fee to open an estate is currently ~$150.00 plus the fee for Letters of Authority. The inventory fee is based on ALL your assets The inventory fee for an estate valued at $250,000 is $550.00.  The inventory fee for an estate valued at $500,000.00 is $863.00.  The inventory fee for an estate valued at $1,000,000.00 is $1,175.00.  These fees are subject to change by the state legislature.  Assets in a trust, in the form of life insurance proceeds or in accounts that are payable on death (POD) or transfer on death (TOD) are not included in a probate estate (but are included in calculating federal estate taxes.)If there are challenges to any probate proceedings that require a hearing or a motion, also require additional fees. These fees are in addition to any fees needed to hire an attorney to assist the personal representative.  Probate attorneys typically charge $175-$250 per hour. The court fees, personal representative fees and attorney fees are paid prior to giving assets to the named beneficiaries.  In addition, if your estate is probated all your assets must be listed and available for anyone to obtain because court proceedings are matters of public record.  That said,  if you desire a trust you must place ALL assets into that trust otherwise assets in your name (with exceptions above) must go through probate court and then be placed in the trust.  For some people, the hassle and time required to place assets into the trust is undesirable.  A trust can also decrease estate taxes due to the federal government.  If you have assets held solely in your name with a total value of $5.45 million in 2016 you must pay estate taxes at a rate of 40%.  Assets up to the $5,450,000.00 are not taxed to your estate or to the beneficiaries (exceptions apply). Please ask me about this option and we can discuss pros and cons.  Another option includes transferring assets during your life.  For 2017 the maximum amount that can be transferred without filing a gift tax return is $14,000 per person.

 

 

 

 

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© 2017 by Kris Ann DeAngelo