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

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!
 

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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. 

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Another story of failed legal planning hit the news the other day, as a single mother from California died during the birth of her fourth child leaving behind four little ones and no guardianship directives. To complicate things further, the father of these children is not (and has never been) in the picture to claim responsibility. So fearing the kids would end up separated in the state welfare system, a neighbor (who also has six children of her own), stepped up to the plate. And, thankfully, the Los Angeles community has stepped up to the plate by donating diapers, clothing, food, etc. for the now mother of 10.

But in most cases, stories like this one don't have such a happy ending. The sad reality is that children are placed in situations their parents would've never have dreamed possible because they didn't take the time to plan ahead in the case of their unexpected death or incapacity.

Let this be a wakeup call for you.

There are three simple things that could have been done differently to ensure these kids were taken care of upon their mother's passing. And if you have little ones at home counting on you, I urge you take these steps now to ensure a legacy--and not regrets--are what you leave behind:

1. Get a Term Life Insurance Policy- For a small amount of money each month, this mother of three with a fourth on the way could have been paying for a life insurance policy so that her children were provided for financially should something happen to her (especially knowing that their father was not in the picture and would not contribute to their care financially). Because she did not have life insurance in place, her children are now forced to rely on handouts and charitable donations from neighbors until they are old enough to support themselves.

2. Name Short-Term and Long-Term Guardians- While this story "seems" to have a happy ending with the neighbor stepping in to raise the four children and keep them all together, will she really be able to manage raising ten children? Maybe there was another friend or a family member who would have raised these kids EXACTLY as their mom would have wanted, but we'll never know because she didn't document her choices for her kids' care.

3. Create a Legacy of Non-Tangible Assets- This mother unexpectedly died during childbirth. Because of this, her newborn baby will never hear the sound of her voice or know firsthand what her mother's values were or how she would have guided her about things like religion, money, discipline, education, sex, or health care. As parents, even if you don't have any money to leave behind, you can leave your children a gift of your values - who you are and what's important to you. You can do that for free by writing letters or recording a CD for your children. If you work with a Personal Family Lawyer®, this is just part of the legal planning process and becomes a gift that is far greater than all the money in the world.

Ideally, the best way to ensure the well-being and care of your family is to meet with a Personal Family Lawyer®-but if that's not feasible for you at the moment because of time or financial constraints or because there isn't one in your neighborhood, I've given you steps you can take in the interim. My number one suggestion is to get in place a Kids Protection Plan and grab a digital recorder or a video recorder. The Kids Protection Plan will guide you through the legal documentation process and even has forms you can complete to leave instructions to your guardian. But, even better than writing them out, speak them. Leave your kids an audio or video message from you - that's truly priceless.

Regardless of how you chose to go about it, take the time to get your affairs in order while there's still time-ESPECIALLY if you have young kids depending on you at home. It's the only way to leave behind a real legacy-instead of regrets-at the end of your life.
 

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If anything good comes out of Michael Jackson's untimely death at all, it will be the universal wake-up call to parents around the globe that says, "You must name guardians for your children in the event of your death or incapacity!"

With a custody battle brewing between the Jackson Family, Michael's nanny, and the biological mother of Michael's children (who might not be the biological mother after all according to reports), in addition to the battle between creditors over his estate, news outlets are finally reporting on the absolute necessity of estate planning for all families with children and what the absence of it means for parents across the globe.

Parents rich and poor, young and old must realize it's time to put the "It won't happen to me" or "I'll worry about it later" mentality aside when it comes to estate planning and doing what's necessary to protect your kid's well-being and care if, and when you can't be there.

Michael Jackson had a slew of lawyers who handled his affairs. You would think someone, somewhere would have taken the time to explain exactly what would happen to his children and his assets if he passed away suddenly-or even found himself unable to care for the kids due to his drug addiction or complications from Lupus.

Clearly, if Michael Jackson's estate planning could fall through the cracks, imagine the millions of people that would find themselves legally unprepared should the worst happen to them or someone they love. Maybe even you.

Unfortunately, you cannot predict how or when you will die- but you absolutely can dictate how your children and your assets will be handled after your death with advanced legal planning.

One of the common myths about estate planning is that "It's just for rich people" or "it's only necessary for old people"- neither of these excuses can be any further from the truth!

The truth is ... if you have a child, whether you have $10 or $10 million dollars, you MUST at a bare minimum name legal guardians for your child in the event of your inability to care for them. Naming guardians includes both short-term guardians for the immediate term and long-term guardians.

It doesn't matter how old you are or how close you are with your family, if you don't put guardianship decisions in writing, your child could end up in the middle of a very messy custody battle-or even worse-in the care of the state foster system!

Naming guardians for kids is so vitally important that I endorse a free website at kidsprotectionplan.com so parents can name guardians free of charge without even stepping foot into a lawyer's office. And for those people who now realize they need something more comprehensive to make life as easy as possible for their family, my firm provides families and small business owners access to an affordable lifetime relationship with a personal lawyer right in their own neighborhood.

And because of the affordable nature of these resources (or FREE in the event of kidsprotectionplan.com ), there is no excuse for leaving your family a huge mess like Michael Jackson's family will have to deal with in the event of your death or incapacity.

So, use this horrible event as a wakeup call and take control of your future and that of your kids! Don't wait another day to document exactly who you want to raise your children if something happens to you before they can care for themselves. Take the time to document the values you'd want passed on to your kids and how you'd want them to be raised if you were no longer around.

Do these things NOW before it's too late, or the court may end up making these choices for you, to the detriment of your kids. And share this article with a friend or family member who has little kids at home. They'll thank you for it.
 

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