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Estate Planning in a World of Social Distancing

The truth is that we’re living in a world of uncertainty that impacts every area of our life. Unfortunately, the fears that arise in the face of a viral pandemic do not erase the need for a careful estate planning. As restrictions on social mobility increase, it’s still possible to get answers to your planning questions in a safe way.

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More than a year ago, our law firm adopted digital technology that allows every member of our team to assist you, as needed, by video. Our Zoom video conference platform allows us to conduct virtual face-to-face meetings with you or other members of your family with ease no matter where they are located.

To participate by video, you don’t need much more than a smartphone, tablet, laptop or PC equipped with a camera and microphone. In real time, we can review any estate planning documents already on file in our system or to review drafts of new planning documents.

With forced time at home, it’s a good time to review your estate planning. In our current circumstances, we recommend, at a minimum, that you have a well-crafted General Durable Power of Attorney. Because of the pressure on the medical system, it’s probably best that your Power of Attorney be one that is effective immediately rather than a springing power the requires confirmation of your incapacity by a physician.

In addition, I recommend that you review your Durable Power of Attorney for Health Care, Advanced Directive or Living Will, if you have one. Under Michigan law, this important document allows you to appoint a Patient Advocate to make your medical treatment decisions if you are unable to make such decisions for yourself.

If you already have a revocable living trust in place you may want to consider adding an additional trustee to your plan right now, rather than waiting until receipt of incapacity or death to allow someone else you trust to make financial or medical decisions.

If you need someone else to aide with banking or other financial decisions, I urge you to resist the temptation to add other people as joint owners on your bank accounts or investments. With proper legal documents in place, taking the short cut of joint tenancy risks a serious loss of control over what you own.

Although the Michigan Uniform Electronic Transactions Act (UETA) law allows use of electronic signatures for business transactions, it excludes use of electronic signatures for wills, codicils or testamentary trusts. Unless additional legal relief is provided, most estate planning documents still must be signed and witnessed the old-fashioned way with pen on paper. We’ve created several options to allow you to get your Power of Attorney, health care directive or other necessary documents updated quickly and cost-effectively.

If you have questions or concerns about your current planning needs, please give us a call at (231) 799-4994. Or, drop us a note using the form below. We’re still here to help.

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Don’t Let Your Wishes Get Derailed by 3 Common Planning Traps

When done effectively, estate planning assures that you can keep control of yourself and your assets at every life stage. Like it or not, every one of us fits into one of the following life stages: 

  • Alive and well 
  • Alive and not well; or 
  • Not alive. 

The method of planning you choose determines your ability keep control of your own affairs at each of these life stages. None of us can predict the timing of a chronic illness or the time of our death. But, we can control how our assets are managed or protected when sickness or death occurs. 

Don’t let your expectations get derailed by these common planning traps:

1. Perils of Joint Tenancy. 

It’s very tempting to try to manage or protect your assets by placing someone else’s name on your bank accounts or property. It’s easy too. Someone at the bank might even have suggested “it’s a good idea” to add a name or two onto your accounts in case “something happens.”  

We don’t recommend planning based on joint tenancy because you lose immediate control over the jointly held asset and you expose your assets to the creditors of your joint tenant.

Because a Will or Living Trust does not control jointly held assets, joint tenancy risks sabotaging your distribution goals after death.

And, if you need help paying for nursing home care adding your child’s name to the deed of your home might prevent you from qualifying for Medicaid.

2. Over Reliance on Beneficiary Designations.

Naming a beneficiary on investment or retirement accounts can avoid probate upon death but provides no authority for any one else to act for you if you are sick or disabled. A beneficiary designation applies only after your death.

Without a General Durable Power of Attorney in place to manage assets during illness, your family will be stuck with an expensive trip to the probate court to obtain guardian or conservator powers.

If your beneficiary is a minor or is a person with disabilities, you will likely be putting your former spouse or the court in charge of how those assets are managed. 

3. Failure to Understand the Limitations of a Last Will and Testament.

Although it’s better to have a Last Will and Testament than to die without one, most people don’t understand how a Will really works. Here are five things you should know about a Will: 

  • A Will offers no help to your family if you are disabled. 
  • A Will only applies to individually owned assets. 
  • A Will does not control jointly titled assets. 
  • A Will does not control beneficiary designation assets. 
  • A Will does not avoid probate when you die. 

In Michigan, all Wills are subject to probate proceedings known as “informal” or “formal” administration. If you’ve read a clause in a Will that’s something like this, “I direct that my Will not be supervised by the Court,” it simply means that you are selecting the most limited form of probate possible under court rules.  

If you’d like to learn more about your estate planning options click on the link below or call (231) 799-4993 to schedule a complimentary Get Acquainted Call.

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Four Reasons Why a Last Will and Testament Is Not an Estate Plan

Most people acknowledge that “someday” they should get a Last Will and Testament in place. However, that’s an old model of planning that’s fixated only on what happens at death.  Estate planning is not just a morbid exercise that’s limited to telling your family what you want done after you are gone. Here are four reasons why having only a Last Will and Testament is not an estate plan.

1. A Last Will and Testament Offers No Help If You Become Disabled.

The sole purpose of a Last Will and Testament is to provide instructions about what you own in your own name at the time of your death. If you are unable to manage your own property because of illness, the personal representative of your Will can’t do a thing about it. Why? Because you are not dead. A personal representative only has authority to act after death by obtaining letters of authority from the probate court.

If your plan does not include a well thought out general durable power of attorney or living trust, your family will have no choice but to go to court if you become disabled.

2. A Last Will and Testament Does Not Protect Your Assets from Nursing Home Expenses.

If you are over age 65, the odds of having a nursing home event are 1 out of 2. And, 1 out of 10 seniors who enter a nursing home are never able return to their own home. At more than $8,500 per month for skilled nursing care, most families rely on Medicaid to pay for it.

If you rely on Medicaid to pay for nursing home care, a Last Will and Testament does nothing to protect your assets. When you die, the State of Michigan has a right to recover the cost of your lifetime care from the value of all assets that are controlled by your Will.

It is a rude awakening for the beneficiaries of your Will to discover that your assets must first be used to pay back the state for your lifetime care expenses.

When that happens, your family is left with virtually nothing. However, if your home or assets are conveyed at death by a method that avoids probate, those assets are not subject to estate recovery.

3. A Last Will and Testament Does Not Control Beneficiary Designation Assets.

It’s important to understand what a Will does or does not control. A Will contains instructions about what you own in your own name at the time of your death. Your Will does not control assets for which you have made pay on death (POD), transfer on death (TOD), or other forms of beneficiary designations.

Many clients hold significant wealth in annuities, qualified retirement accounts, life insurance or other assets. All too often, beneficiary designations for these types of resources are completed in a manner that is much different than the instructions contained in your Will. When this happens, your beneficiaries may be in for some unpleasant surprises because of inconsistent planning instructions.

4. A Last Will and Testament Does Not Avoid Probate.

Many of our clients share a common goal of preserving privacy at death. If that’s an important goal of yours, a Will is not enough. A Last Will and Testament is nothing more than a letter of instruction to the probate court about how you wish to divide what you own in your own name at the time of your death.

At a minimum, the process of administering your Will requires an application for informal probate to obtain letters of authority to carry out your written instructions. As a result, your instructions about who is in charge and what you want them to do becomes publicly accessible information. If you wish to maintain privacy about those things, a Last Will and Testament is not enough.

Leaving a Legacy is Not Always About Documents

While the job of an estate planner is to help families plan for the crises of sickness or death, drafting a Last Will and Testament or a Living Trust is not the only way to leave a legacy. For 52 years, my late father served as a pastor. More than a few times in the last week, I’ve heard his voice rattling in the back of my head. What I imagine are words of encouragement – don’t lose hope – the best is yet ahead – God has a plan for your life.

On this day, I encourage you to think about simple actions you can take that would leave a legacy for others:

  • Practice Gratitude.  No matter what your circumstances, be grateful for the gifts of family and friendship. Share your appreciation for the good things you have experienced with the people you love.
  • Reach Out to Someone.  Living in isolation can add to fear. Give someone a call or FaceTime a friend and let them know you’re thinking about them. Share something humorous. Bring a smile to someone else’s face.
  • Focus on Having a Positive Mindset. In the Epistle to the Philippians, a book of the New Testament found in the Christian Bible, Paul encourages us to meditate on those things that are true, that are noble, that are just, things that are pure and lovely or are of good report. Maybe it’s a good day to turn off the news and enjoy something beautiful like a great work of art.
  • Speak Someone Else’s Love Language. In 1995, Dr. Gary Chapman wrote a novel book that identified 5 ways that describe how we feel loved and appreciated. One of those ways is to share words of affirmation. Send someone a message or make a call and leave a legacy by sharing a word of affirmation.

5 Reasons Why You Should Consider a Living Trust

Creating an estate plan to protect yourself and your family is one of the most important life decisions you can make. People often ask about the differences between a Will and a living trust. A living trust offers many advantages over traditional Will based planning.  Here are 5 reasons why you should consider a living trust:

1. Preserve Privacy and Avoid Probate.

A fully funded living trust allows you to manage or transfer your assets upon sickness or death in complete privacy. 

In the event of illness, a living trust can provide for the management of your assets and give instructions about your own care (or the care of those who depend upon you) without the involvement of the probate court. Unless your estate plan includes a living trust or a general durable power of attorney, your family may face a trip to the courthouse to obtain letters of guardianship or appointment of a conservator before anyone can make decisions about you or your assets.  

Unlike a Will, a living trust does not have to be registered with the probate court at the time of your death; nor, does a living trust depend upon issuance of letters of authority from the court to allow your fiduciary to carry out your wishes. When you have a living trust, the value of your assets and the identity of your beneficiaries do not become a part of the public record.  

2. Avoid the Perils of Joint Ownership.

It’s a common temptation to try and avoid probate by placing your assets in joint ownership with a child or other person on the assumption that if you get sick or die, your joint owner will be able to “take care of everything” when something happens to you.  

In most cases, joint ownership arrangements are a mistake. The moment you place someone else’s name on your assets you are giving them access and control over what you own. The moment you put someone else’s name on your accounts you risk making their problems your problems. Through no fault of your own, your joint owner’s creditors may be able to garnish your savings.  

Joint ownership arrangements cause a loss of control.  Adding someone else’s name to an asset is easy but getting them off is not. When you add another person on your asset title you may be giving that person a veto power on your personal decision-making. Many forms of joint ownership prevent you from closing accounts or selling assets without your joint owner’s consent.  

In the event of your death, jointly held assets automatically become the property of the surviving joint owner. When that happens, there is no legal guarantee that your surviving joint owner will share your assets the way you intend. 

In most cases, a living trust is the best legal planning tool for keeping control over your own assets at sickness or death.  

3. Protection for Minor Children. 

A living trust is a great way to provide benefits or protection for minor children. If you die before your children reach legal age, a living trust can be used to provide for your child’s education or other expenses until they are responsible enough to manage their own resources.  

It is a planning mistake to name a minor child as a direct beneficiary of your life insurance or other retirement assets. Without a living trust, upon your death, your insurance underwriter or retirement plan custodian will not make any distributions to a minor without a court order appointing someone to manage those resources until your minor child reaches the age of 18. If you are divorced, more likely than not, that person will be your former spouse. 

4. Protection for Adult Beneficiaries.

If your adult beneficiary has a problem with alcohol, drug addiction, or has other special needs, you may want to consider a living trust as a method for providing safeguards to inappropriate spending. A trustee that you appoint can hold and manage resources for your beneficiary consistent with your instructions without fear that what you leave will be wasted or cause your beneficiary to be disqualified for public benefits. 

5. Consistent Results.

A living trust is a great way to assure consistent and fair results at the time of your death. Transfer on death designations or direct beneficiary designations may avoid probate when you die but don’t provide instructions about what to do if your child or beneficiary fails to survive you or becomes disabled.  

When you name a living trust as the owner or beneficiary of your assets, your desired outcome is highly predictable because the instructions for all assets are contained in one private legal document that contains your distribution wishes. 

If you’d like to learn more about your estate planning options, click on the link below or call (231) 799-4993 to schedule a complimentary Get Acquainted Call.