Why should I estate plan?
It is important for you to take the time to estate plan to ensure that at the time of your death, your assets will be properly taken care of and distributed to the family member(s), or friend(s) which you have selected prior to your death.
What happens if I do not estate plan?
Michigan law will dictate who will receive your assets (and the percentage of your assets) at the time of your death. Your assets may be distributed to family members that you would not choose to receive part of your estate. Your estate may also have to pay unnecessary estate, gift, transfer and other taxes. It may be necessary for a family member or friend to seek the court’s permission to manage and distribute your assets (probating an estate).
What does it mean to probate an estate?
If it is necessary to probate your estate, your Personal Representative (named in your will) must file appropriate paperwork, requesting that the judge grant him or her permission to take inventory of, manage and distribute the assets which you owned at the time of your death. Your Personal Representative must file the paperwork with the Probate Court in the county where you lived at the time of your death (for real estate- in the county where the property is located). If you have not signed a will at the time of your death, a family member or friend may file the paperwork in probate court, however Michigan law will determine which family member may act as your Personal Representative.
Which assets have to be probated at the time of my death?
Assets for which you have not named a living owner or beneficiary must be probated at the time of your death. In order to determine whether or not it will be necessary to probate each of your assets, your Personal Representative must review the paperwork associated with each of your assets (e.g. real estate – deed; life insurance – contract or policy; bank accounts- passbook and bank statements) to determine whether you named another owner or beneficiary for each asset. If you named another owner or beneficiary on the paperwork for a certain asset and that owner or beneficiary is living at the time of your death, the Personal Representative can distribute that asset to the owner or beneficiary that you’ve named without the probate court’s involvement, after ensuring sure that all funeral and medical expenses and taxes, etc. have been paid. If you have not named another owner or beneficiary for a certain asset or the owner or beneficiary that you named died before you, your Personal Representative will have to file paperwork with the probate court for permission to manage and distribute that asset (probate that asset).
What is a Living Trust?
A living trust is a legal document in which a Grantor (owner of assets) names a Trustee (person to manage the trust assets) and beneficiaries (person/people who receive the trust assets). The Grantor is usually also the Trustee, however, the Grantor should name at least one Successor Trustee (person to act as Trustee if the Grantor is unable or unwilling to manage the trust assets).
The document is called a “living” trust because the Grantor transfer his assets into the trust name while he is living. It is imperative that the Grantor transfer his assets into the trust name while he is living (also called “funding the trust”). The Grantor transfers assets into the trust name by naming the trust on the paperwork associated with each of his assets (e.g. naming trust as grantee on quitclaim deed for real estate; naming trust as beneficiary on life insurance policies and retirement benefits).
One of the greatest advantages of signing a living trust is the Grantor’s ability to name a Successor Trustee and grant the Successor Trustee authority to sign legal documents relating to Grantor’s trust assets, even after the Grantor’s death. This authority to sign legal documents on behalf of another is similar to the authority granted in a power of attorney, except the authority to sign under a power of attorney ends at death, the authority to sign as Successor Trustee continues even after the Grantor’s death.
A living trust should not be confused with trusts for minors (testamentary trusts), which limit how much and when a minor beneficiary will receive assets. A testamentary trust can be included in either a will or a living trust.
What is a Will?
A will is a legal document in which a Testator (person who signs the will) states his intentions regarding who will manage and distribute his assets at death. A will has no legal effect until the death of the Testator. A Testator names a Personal Representative (formerly called an Executor or Executrix) to manage and distribute assets at the death of the Testator.
- Names beneficiaries
- Names a Guardian (person/people with legal custody of a child) and/or Conservator (person/people with authority over money on behalf of a child)
- Make provisions for organ donation and the means for burial, cremation, funeral specifics, etc.
It is important to note that language in a will regarding beneficiaries will not take priority over the paperwork associated with a particular asset (e.g. if a Testator has named his spouse on the deed to his home, but stated in his will that his son should receive his home in the even of Testator’s death, the language in the deed will control and the Testator’s spouse will receive the home upon Testator’s death).
What is Durable Power of Attorney?
A durable power of attorney is a legal document in which you name a person (Attorney-in-Fact) to sign legal documents on your behalf in the event that you are unable or unwilling to sign yourself. You may be unable or unwilling because you become sick or elderly and are unable to understand the decisions that you are requested to make; or you may be unable or unwilling to sign because you are out-of-town on business or vacation or you have three little kids at home and cannot leave the house to go to the bank to sign.
A durable power of attorney can be cancelled (revoked) at any time and has no legal effect on your death. A durable power of attorney also can become effective immediately or upon a stated disability. It is important to note that your Attorney-in-Fact does not have any authority to act on your behalf unless you are unable or unwilling to act. You may be asked to sign a document stating that you are unable or unwilling, or, if you cannot, your Attorney-in-Fact may have to provide a statement from a doctor stating that you are not able to make decisions.
A durable power of attorney can give the Attorney-in-Fact authority over all of your business/financial affairs or be limited to a certain period of time or subject (e.g. Durable Power of Attorney Delegating Parents’ Rights).
What is Durable Power of Attorney for Health Care or Patient Advocate Designation?
A durable power of attorney for health care or patient advocate designation is a legal document in which you name a person (Patient Advocate) to make decisions on your behalf regarding your medical care, custody, or treatment in the event that you are unable or unwilling to make your own decisions regarding your medical care, custody, or treatment.
The Patient Advocate that you name must sign an Acceptance by Patient Advocate, evidencing that he is agreeing to act as your Patient Advocate. This acceptance distinguishes a durable power of attorney for health care/ patient advocate designation from a living will. The State of Michigan does not recognize living wills. In a living will, a person names another person to make his/her medical decisions on his/her behalf, but the person named does not have to consent to being named in the living will. In fact, the person named in the living will can refuse to act.