At Accettura & Hurwitz, we consider an estate plan to be an essential element of individual and family planning; an owner’s manual of sorts. Estate planning is the process of ordering one’s affairs in contemplation of death or disability. A typical Michigan estate plan includes a revocable trust (sometimes called a “revocable living trust”), health care power of attorney, general power of attorney, and a last will and testament.
A revocable trust has a number of advantages over a simple will. Trusts avoid probate, and provide structure during the disability of the grantor – thus avoiding a conservatorship – and after death. By avoiding probate, trusts are not a matter of public record and therefore preserve the privacy of the grantor. Trustees must follow the terms of the trust that grants them authority. This “fiduciary” responsibility is mandated by the trust document and supported by Michigan law. Failure to comply with the terms of the trust may subject the trustee to liability. The high standard applied to trustees ensures that the grantor’s wishes are honored. It is this very feature that makes trusts ideal for administration of one’s assets before and after death.
Trusts are simply mandatory for anyone facing a potential disability; those with minor, handicapped, disabled, or immature children; second marriages, where a fight is expected; or for larger estates. A trust must be properly funded. Funding is the process of transferring ones’ assets into trust. The method of funding is determined by the type of asset being funded. Typically, ownership of real estate is transferred to the trust by use of a warranty deed that is recorded in the county in which the property is located. Ownership of business interests are also changed to reflect ownership by the trust. Life insurance beneficiary designations are changed to name the trust as primary beneficiary. Funding retirement accounts is more complicated, and depends on whether the grantor is married or has minor or dependent children. Obtaining the full benefit of a trust requires proper and complete funding.
There are other kinds of trusts besides revocable trusts. Irrevocable trusts are used for asset protection purposes, and to exclude the value of life insurance from the decedent’s estate. Charitable trusts are used to make gifts to charity and save income and estate tax. Special needs trusts are used to preserve the inheritance of incompetent beneficiaries receiving government benefits. Assets in a special needs trust may not be used for the primary support of a disabled beneficiary receiving government benefits. By prohibiting use for primary support, a special needs trust accomplishes two objectives: 1. the inheritance will not disqualify a disabled beneficiary from government benefits; and 2. trust assets may be used to supplement government benefits for items such as specialized medical care, travel, and other items not covered by government programs. Testamentary trusts are used for married couples to avoid Medicaid disqualification in the event the community spouse predeceases the institutionalized spouse. See our book: Medicaid and Long Term Care in Michigan: Getting Good Care Without Going Broke.
A Michigan health care power of attorney allows you to name a patient advocate to make your medical decisions in the event you become incompetent. A patient advocate may be empowered to terminate life support systems in the event the maker is terminally ill or in a persistent vegetative state. A health care power of attorney avoids probate court involvement in medical decisions. It is important that the patient advocate be granted HIPAA (Health Insurance Portability and Accountability Act) powers in order that they may access medical records. Health care powers of attorney drafted prior to 2003 must be updated for HIPAA.
A general durable power of attorney allows for the appointment of an agent to handle all of your non-medical matters in the event you become incompetent. Your agent stands in your shoes to sign your tax returns, interact with governmental agencies, sell your automobile, and perform a whole host of duties on your behalf as if you yourself were present.
A Will is an essential part of every estate plan, even where a trust has been adopted. The Will appoints the decedent’s personal representative (formerly known as executor or executrix), guardian of minor children, and allocates tangible personal property such as jewelry, furniture, and other collectibles.
We have written a book on Estate Planning in Michigan which covers these topics and more: Read it on-line or order the book from our Bookstore.
What happens if I die without a Will?
What is an estate plan?
What assets are included in a decedent’s estate?
Are durable powers of attorney included in most estate plans?
Are there special estate planning considerations where there has been a second marriage?
What planning strategies are available for larger estates that contain valuable businesses and real estate assets?
My children are well-off. Can I leave my estate to my grandchildren?
Accettura & Hurwitz Attorneys and Counselors are experienced Michigan estate planning lawyers. Don’t put off creating your estate plan. Contact us today!