A handy reference written for laypersons & professionals
The book explores common estate planning topics from the Michigan resident’s perspective including wills, durable powers of attorney, and revocable living trusts. Along with more sophisticated estate planning tools such as irrevocable trusts, charitable remainder trusts, and family limited partnerships are explained in understandable terms.
Introduction
In my twenty-plus years of practice in the estate planning area, I have learned a great deal about my craft, my clients and myself.
About my clients, I have learned to listen very carefully to what they are – and what they are not – telling me. I have learned to let them tell their story.
An effective estate plan requires that I understand my client’s life journey, who they are, and the people who are most important to them. Important clues about their priorities, philosophies, and goals invariably emerge from our small talk. My clients have taught me a great deal about life.
After having met with more than a thousand clients, from all walks of life, I have learned that the most important things in life, in order of importance are:
- physical and mental health
- a family that loves you
- an upbeat positive attitude about life
I have also learned that if you compromise your health or your family to accumulate wealth, you have likely made a bad bargain. With a bit of financial planning you are not likely to be destitute in your old age, unless you lack any of the three items listed above. For these lessons I am grateful.
Few of us will leave a legacy of great wealth, authorship, or invention. Our names will never become household names to adorn buildings or stadia. Instead, we are likely to only be remembered by our closest friends, children, and grandchildren. Our estate plan is our last communication to these precious loved ones. It contains our final wishes and instructions concerning our body and possessions. We also appoint our successors to succeed us when we are no longer able – through death or disability – to manage our own affairs.
Trusts – both revocable and irrevocable – are an integral part of the modern estate plan, and are the subject of a great deal of the discussion in the Chapters that follow. Apart from avoiding probate and minimizing tax, trusts allow us to not only identify who will inherit our assets but when they will inherit them.
We can essentially control from the grave to protect our surviving spouse, children, and grandchildren, as we would have done in life. We can prevent our heirs from inheriting too early, or losing their inheritance to divorce. We can encourage college attendance, and prevent handicapped children from becoming ineligible for government assistance due to their inheritance. Through trusts, we can create structures that allow our surviving spouse to manage assets after our death.
Michigan and federal law provide us with a great many tools to accomplish the estate planning results we hope to achieve. As with most things in the modern world, technical concepts and requirements abound. I have written.
The Michigan Estate Planning Guide to serve as an introduction to the concepts, terms, and tools of estate planning. I hope that it will be useful to those thinking of preparing an estate plan – as we all should – as well as to those who have already have a plan but who need to refresh their memory as to what they knew, but forgot, or perhaps what they never quite understood.
The book has been organized in a question and answer format to allow you to zero in on the answer to your particular question. The book can also be read like a novel – from front to back – giving the reader an overview of the entire estate planning process. I have attempted to write in clear and concise language understandable to the layperson without a legal background.
Interestingly, The Michigan Estate Planning Guide is currently being used as a text in a number of financial planning and paralegal courses around Michigan. Endnotes, beginning at page 131, lead professional readers, such as accountants and attorneys, to the legal authority that underpins the text.
I have attempted to define terms as I go, however, you may find it useful to refer to the Glossary if a more complete definition of a term is desired.
The Chapters tend to get harder as you go. The earlier Chapters address some of the most basic concepts of estate planning, while the latter address the most complex. Hopefully, the confidence gained while reading the earlier Chapters will encourage you to tackle the more difficult material. Chapter 17 on retirement plan distributions is intimidating but is of critical importance.
By retirement age, our retirement savings will likely be our largest single asset – contrary to the old motor oil commercials claiming that after your home, your car is likely your second most valuable asset!
If I can motivate you to explore topics you had previously thought to be beyond your comprehension, I will have done my job.
As the name implies, The Michigan Estate Planning Guide, focuses on estate planning for Michigan residents. The concepts introduced herein are based on Michigan law, and should not be relied on by non-Michigan residents.
Although federal law largely drives estate planning in all fifty states, certain aspects vary dramatically from state to state. The law pertaining to cessation of life support systems, state inheritance or estate tax, probate, and intestate succession differ depending on domicile of the patient or decedent. With minor exception, I have specifically omitted any self-help or do-it-yourself documents. These items have not been excluded to perpetuate the need for lawyers, but to avoid the pitfalls of self-help. A sad, but somewhat humorous, example of why we shouldn’t act as our own attorney is the case of Warren Berger, former Chief Justice of the United States Supreme Court.
Late in life, and soon after this wife’s death, Justice Berger prepared his own Will. Having used a simple Will to pass his estate to his children, Justice Berger’s entire estate was required to pass through probate. Since probate proceedings are a matter of public record, we were able to obtain a copy of Justice Berger’s Will from Arlington County (Virginia) Probate Court. From the probate files we learned that Justice Berger’s net worth at death was approximately $1.8 million, that he left one-third of his estate to his daughter and two-thirds to his son. Justice Berger’s failure to prepare a proper estate plan subjected his estate to the cost, delay, and loss of privacy that probate entails. Justice Berger’s estate could have been handled privately had he and his wife prepared revocable living trusts while they were both able.
Like Justice Berger, our own Coleman Young exposed himself to the indignity of probate. Coleman Young was a fiercely independent and private man. If he didn’t like a question, he would simply bark “none of your damn business.” Yet, by passing his assets through his Will, he exposed his most private affairs to probate and public scrutiny. In Coleman A. Young’s Will, obtained from the Wayne County Probate Court, the late Mayor provides for his housekeeper, family members and the son he at one time denied to be his own. By holding his son’s inheritance “in trust” he commits a further gaffe. Trust arrangements created in a Will are known as “testamentary trusts,” which must pass through probate not just at the time of the decedent’s death, but each and every year thereafter until by its terms it expires.
Traditionally, the law relating to estate tax and estate planning has been extremely stable. Although there have been predictable changes, the new laws, once enacted, have provided adequate guidance for us to plan our future. Unlike past tax acts, The Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”) is filled with uncertainties, and has made planning much more difficult.
EGTRRA was the first tax act of President George W. Bush. It was billed as the final dagger to the heart of the unnecessary and unfair "death tax." With budget surpluses predicted far into the future, the estate tax was deemed to be unfair and expendable. As seen in Chapter 12, the new law would gradually phase out the estate tax until its total repeal in the year 2010.
The new law has two major problems: First, the Act – as a result of the "Byrd Amendment" – comes back from the dead in 2011 (a year after its supposed elimination); and second, dramatic changes in the U.S. economy and world politics since September 11, 2001 bring into question the advisability of eliminating the estate tax.
There will likely be legislation in the next few years that postpones, modifies, or repeals EGTRRA. Unfortunately, it is impossible to predict the content and form of future legislation. In the meantime, the only prudent course is to anticipate that some form of estate tax will exist far into the future and to proceed accordingly.
I hope the Michigan Estate Planning Guide allows you to make good estate planning decisions for you and your family. Read it in good health.
Sincerely, P. Mark Accettura