Michigan Estate Planning Law Blog : Michigan Estate Planning Lawyer & Attorney : TJ Wall Law Firm : Southeast MI Wills, Trusts & Probate Issues

According to a new study in the New England Journal of Medicine, one in four elderly Americans require someone else to make decisions about their medical care at the end of their lives.

Here's the good news: the study found that planning improved the likelihood that a patient's wishes would be followed and reduced emotional trauma among family members. "The results illustrate the value of people making their wishes known in a living will and designating someone to make treatment decisions for them, the researchers said," The Associated Press reports. "In the study, those who spelled out their preferences in living wills usually got the treatment they wanted. Only a few wanted heroic measures to prolong their lives. The researchers said it's the first accounting of how many of the elderly really end up needing medical decisions made for them."

I have long advocated that every adult should have a durable power of attorney for healthcare decisions as an integral part of a comprehensive estate plan.

Now for the bad/surprising news: according to a recent article in the Washington Post, five years after the court fight over allowing Terri Schiavo to die, most Americans still don't draft the legal documents that spell out how far caregivers should go to keep them alive artificially. End-of-life experts estimate only 20 percent to 30 percent of U.S. adults have advance directives, the same as before the Schiavo case. Even in polls of older Americans, who fill out such forms at higher rates, there is little if any change from 2005. 

Have you taken the time to clarify your end-of-life wishes, what you want out of your final years, how you want to be cared for, where you want to live and so on? You should have this important conversation with your loved ones, and you should memorialize your wishes in the appropriate legal instrument drafted by a trained attorney.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

When your parents die, you are the one who will be responsible for taking care of everything they leave behind. My dad died when I was in law school and even though my mom was still living, ensuring that his estate was administered properly was my responsibility. There are steps you can take today to make sure that it will be as easy for you as possible and that what you inherit will be as protected as possible. Avoid these three mistakes.

Mistake #1 – The Way Your Parents’ Assets are Titled Could Cost You Tens or even Hundreds of Thousands of Dollars. If your parents’ own their home and other assets in their own name and not in the name of a well-drafted living trust, you could have to deal with an expensive, time-consuming and frustrating court process called probate. Probate is totally and completely avoidable by ensuring that all of your parents’ assets are held in trust properly.

Mistake #2 – Failure to Have Powers of Attorney and Health Care Directives Could Leave Your Hands Tied. If one or both of your parents become incapacitated, you could be stuck without a way to access their bank accounts and critical information if they have not executed updated legal documents that not only protect them, but you as well.

Mistake #3 – Your Parents’ Living Trust Might Leave Your Inheritance at Risk. If your parents’ trust is drafted in the best way possible, you could receive your inheritance protected completely from lawsuits, divorce and estate taxes. But, if it’s drafted incorrectly, your inheritance could be at risk.

You can easily avoid all of these mistakes today by having your parents’ estate reviewed by a specialist who can take the necessary steps to prepare everything for a smooth administration. Invest a fraction of the time and energy today to avoid 10x the complication, stress and cost later. It’s one of the best and least expensive investments you can make for your peace of mind.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Happy New Year!  I hope you enjoyed the Holidays with your family and close friends. Well, despite my last post about the pending estate tax legislation, there is currently no tax on the estates of those dying during 2010! Although Congress may reinstate the tax retroactively in 2010, perhaps as part of broader tax reform, this is not a certainty. Burned by their near-universal conviction that Congress would act to preserve the tax before it expired on December 31, 2009, experts are now wary of predicting what lawmakers will do. 

If Congress fails to act, a few thousand very wealthy families will have reason to celebrate, while tens of thousands of taxpayers of more modest means will pay capital gains on inherited assets thanks to the end of the basis step-up and the start of modified carryover basis rules. In addition, executors will face confusing administrative burdens, and married couples with credit shelter trusts may want to revise their plans, at least for 2010. And if Congress does change the law retroactively, extensive litigation over inheritances is almost guaranteed.

The chief tax counsel for the House Ways and Means Committee estimates that while extending the 2009 estate tax law would have affected about 6,000 estates, 71,400 estates could face new capital gains taxes with the estate tax gone. According to the Center on Budget and Policy Priorities, "at least 62,500 of these are estates that would not owe any estate tax if the 2009 rules were continued and that thus would be adversely affected by estate tax repeal. Farm and business estates would constitute a disproportionately large share of this group." (Small farms and businesses are the groups whose interests opponents of the estate tax have claimed they are defending.)

The Perils of Going Retroactive

Senate Finance Committee Chairman Max Baucus (D-MT) has pledged to try to restore the estate tax retroactively in 2010. This would undo the capital gains increase, but it could also create fertile ground for lawsuits by those whose family members die between January 1, 2010, and the date when any retroactive law is enacted.

"I can guarantee this: if they succeed in getting retroactive in hiking the death tax from zero to 45 percent, there are going to be lawsuits," said Dick Patten, president of the American Family Business Foundation, which opposes the estate tax. "Its going to be messy, its going to be noisy." (For an excellent discussion of the mess that a lapse in the estate tax could create, see this article by Forbes.com. "Beneficiaries will deal with uncertainty for years," warns one tax expert.)

 What to Do?

In the meantime, estate planning attorneys and their clients are trying to figure out what to do. Particularly vulnerable are married couples with credit shelter trusts that are designed to allow both spouses to take advantage of their respective estate tax exemptions. With the estate tax gone, the wording of these trusts could be interpreted as completely bypassing the surviving spouse when the first spouse dies, meaning a surviving spouse would get nothing without claiming an elective share. (For commentaries, click here and here.)

Along with the estate tax, the generation-skipping transfer tax also disappears in 2010. Some wealthy individuals may bet that Congress won't extend the law retroactively and therefore make large gifts to grandchildren.

"Ten years ago, there was a lot of gallows humor about repeal when everybody said it would never happen," said Rep. Richard Neal (D-MA), chair of the House Select Revenue Subcommittee. "Now, one of those never-happen moments has happened, and nobody's laughing."

For more on the implications of the disappearance of the estate tax, see the Future of the Estate Tax blog.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

On Thursday, December 3, the House of Representatives passed the "Permanent Estate Tax Relief for Families, Farmers, and Small Businesses Act of 2009" (H.R. 4154) sponsored by Rep. Earl Pomeroy (D-ND) by a vote of 225-200. The bill makes permanent current estate tax provisions of a 45 percent estate tax rate and a $3.5 million per-person exemption. There is no provision for indexing for inflation. The bill also maintains the so-called “step-up in basis” tax rules. Similar action is not expected in the Senate, where a one year extension of current law is considered more likely. To read a record of the proceedings, visit: frwebgate.access.gpo.gov/cgi-bin/getpage.cgi

As I have been advising my clients for the last few years, if Congress takes no action whatsoever, the estate tax is scheduled to enter one year of full repeal in 2010 followed by a return of the estate tax in 2011 with a much lower exemption amount ($1 million) and a much higher maximum tax rate (55%). I am optimistic, however, that logic will prevail (despite the fact that we are dealing with D.C. politics) and our current $3.5 million exemption will be extended for at least the short term.

Two important points I want to stress: (1) The federal estate tax is all-encompassing and is levied upon a deceased person's worldwide gross estate (any and all assets that the individual owned or had an interest in as of the date of death, i.e. real estate, cash, stocks, bonds, life insurance proceeds, patents, etc.); and (2) In a married couple scenario, the present $3.5 million exemption is not "automatic" for each spouse; proper planning must be implemented to take advantage of this "double exemption" opportunity.   

Our firm will continue to closely monitor these developments and will certainly alert any clients whose plans may need attention as a result thereof. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Well, Halloween is now over and I'm sure your doorway was packed all evening with scary little goblins, ghosts, witches, and an assortment of other monsters. And, if you're like me, you more than likely bought way too much candy and now you're pondering whether to pitch it or just enjoy some serious sugar munchies. That's just between you and your waistline!

With the House of Representatives passing its plan for overhauling the nation's health care system this past Saturday, no matter what side of the political aisle you are on, there can be no doubt that having access to quality and affordable health care is a huge issue for many Americans. Along those lines, the truth is that now you will more likely experience a long-term disability than a catastrophic death. If all you have is a will, you’ve done nothing to plan for that disability. A comprehensive estate planning approach must include planning for your disability, as well as your passing.

Most people think of “doing estate planning” as the act of creating and signing a will. While in some cases, a will is the best instrument, you can’t get to that answer without engaging in a comprehensive process where the lawyer gets to learn about you and your family, your goals and desires, your values and expectations. Only then can an effective estate planning attorney recommend the best document or set of documents to create an estate plan that “works” for you.

In the end, estate planning should be about giving you the control and flexibility to live your life with peace of mind, knowing that there are safeguards in place that will help you provide for your loved ones if you are disabled. An effective estate plan will let you give what you want, to whom you want, when you want them to have it, and in the way you want them to have it. All the while providing a way to allow you to pass along both your wealth and your wisdom.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

I am very privileged to have been selected as one of only three Michigan attorneys (and 70 attorneys nationwide) for the Personal Family Lawyer designation awarded by the Family Wealth Planning Institute.  Last week the founder of FWPI, Alexis Neely, appeared on ABC's "View From the Bay" television program. She offered sage advice to three very different types of people - a young single guy, a boomer woman close to retirement, and a mom of two young kids - debunking the myth that estate planning is just for the rich. In fact, it's for everyone who cares about their family.

It's about who takes care of your kids if you can't and who makes medical decisions on your behalf (Remember Terry Schiavo?) if you can't make them for yourself and ensuring you pass on your values and leave behind a real legacy for your loved ones and not a mess. Check out Alexis here:
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

A substantial part of my practice is dedicated to helping families with young children complete their essential legal planning. Today, families are more concerned than ever before about protecting inheritances and making sure that what they leave behind will be there for their children when their children need it most.

Seems like the Wall Street Journal agrees with me. On June 3, 2009, the WSJ printed an article taken from a new book, “The Wall Street Journal’s Financial Guidebook for New Parents” by Stacey L. Bradford. Here’s an excerpt from that article:

Do you anticipate leaving your children more than a modest sum of money?
A trust may not be worth the effort if you think you’ll only be leaving a child (or children) $100,000 or less. On the other hand, if you’re leaving life insurance money to cover four years of school and you own a home, there’s a good chance a trust would make sense for you.

Do you want to have some say in how your children’s money is spent?
A trust allows you to restrict spending to basic support, including food, clothing, education and health care. This is something that can’t be done with a custodial account. If the custodian is a soft touch, he could end up lavishing your child with designer jeans and a fancy car, leaving very little left for the college years. Even worse, if the custodian is also the guardian, he could start writing himself large “support” checks to help cover his other expenses.

Would you prefer that your children not inherit the money when they turn 18 or 21?
If you think giving a high-school senior a large sum of cash is a recipe for disaster, then you should consider a trust. The ability to delay inheritance was the main draw for drafting a trust for Laurie and Greg Wetzel, a New York City couple in their mid-30s with three small children. Should something happen to both of them, they decided, their kids will each receive half of their inheritance at age 30, and the remaining amount when they reach 35.

“Your 20s are such a transitional time that we don’t want our children to have significant financial decisions to make,” Ms. Wetzel says.

Do you want the money to be used for a college education?
If you specifically bought life insurance so that there would be enough money to help fund college in the event of your death, then you’ll definitely want to delay the age at which your kids inherit your money. Otherwise, your child could think a red Ferrari is a better investment than a crimson Harvard diploma.

Would you like your children to have recourse if their money is mismanaged?
One more benefit of a trust that you don’t get with a custodial account is that a trust is a legal contract; the trustee has an obligation to follow your directions and act in a reasonable and prudent manner. If the beneficiary feels the trustee spent the money frivolously, he can demand an accounting, and can sue for reimbursement if the trustee acted improperly with the funds. It may be pretty tough to prove illegal or improper actions with a trust, but just the threat of a possible lawsuit can keep someone in line.

This advice is "spot on" from the Wall Street Journal. However, I disagree with the WSJ author's comment that parents need not worry about signing "standard" forms. I think that’s lazy lawyering, terrible client service, and could result in a client's false sense of security and, ultimately, a failed estate plan. When we design an estate plan for a client, that plan is customized to the client’s specific circumstances and goals. I would recommend that clients demand the same from any estate planning attorney they visit and walk (no, run!) away if that attorney is unable or unwilling to honor that request.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Part of the 2006 tax reconciliation bill is about to matter to many of us come January 1, 2010. It's sort of a good-news/bad-news deal -- but more good than bad for many. As of January 1, 2010, there will be no income limits for those who want to convert a traditional IRA to a Roth IRA. That's good because in the past, households with an adjusted gross income of more than $100,000 have been barred from converting their IRAs to Roth IRAs, and married spouses filing alone have been barred regardless of their income.

As a quick refresher, Roth IRAs are retirement savings accounts where you pay the income taxes due up front (when you contribute to the account) -- then, it grows tax-free and your withdrawals are also tax-free (but you don't get the income tax deduction when you initially contribute the money).

So, for those of you whose traditional IRAs are now worth far less than they used to be worth (that's the bad news part), converting to a Roth IRA in 2010 could be a great idea: Since the account is now worth so much less, the taxes on the conversion will also be much less than they might have been, and if tax rates go up in the future, as many predict they will, you'll have already paid the taxes due on the account.

For a good analysis on the ins and outs of the new rules, check out this Wall Street Journal online article. And, as always, please contact our firm for advice tailored to your specific situation...happy reading!
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

A Death Probate is a legal proceeding ultimately controlled by the county probate court.  Probate procedures vary among the States.  Some are more complex than others.  Michigan allows for informal, as well as formal proceedings.  Despite these differences, the probate process consists of many steps and procedures that remain a mystery to most people.

For the most part, a Death Probate and the administration of an estate are comprised of six basic tasks: (1) admitting the decedent's will to probate court and determining its validity; (2) notifying the decedent's heirs and beneficiaries; (3) taking an inventory and appraising the decedent's assets; (4) paying any last known creditors; (5) ensuring that any necessary taxes have been paid; and (6) distributing the assets to the beneficiaries or heirs.

The probate process often can be expensive and time-consuming.  Studies indicate that the average cost of probate is anywhere between 6% and 12% of the value of the gross estate.  The gross estate is the full appraised value of the estate without any reduction for debts or expenses.  Some of the costs associated with probate are court filing fees, attorney fees, appraiser fees, inventory fees, bond premiums, and, perhaps the largest expense, asset preservation costs (real property taxes, insurance and maintenance) related to maintaining real estate and other assets while the court process is pending. 

The entire probate process can last from several months to several years.  The average length of a probate proceeding is between one and two years, although even the probate for a small, relatively uncomplicated estate sometimes lasts several years.  The probate process is also a matter of public record.  Anyone can access a decedent's probate file and discover very personal estate planning and financial information about the deceased person and his or her family.  If you don't believe me, just visit your local county probate court and request to view the file of a recently deceased family member or friend...it's that easy!  Often, unscrupulous individuals access these records and prey upon unsuspecting family members and heirs of the decedent.

If that's not enough, if the decedent owned real estate (another home, a parcel of vacant land, a timeshare interest, etc.) in another State, the family may be required to initiate an "ancillary" probate court proceeding in each one of those States, thereby compounding the time, costs and hassle of settling the estate.     

Proper estate planning can eliminate the Death Probate process.  It is all about preserving your hard-earned assets, saving tax dollars, professional fees and court costs, and keeping you in control of your own affairs.  While it certainly is "peace of mind" for you, ultimately, it is a blessing for your loved ones. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link