Planning for your future and your loved ones

If it is important to you that your assets are managed in the way that you intend after your death or in the event you become legally unable to manage your assets (incapacitated), a trust is likely the appropriate legal vehicle for you. A trust also alleviates the burden on your family or friends of dealing with complex administrative, legal, and investment issues along with coping with the death or incapacity of a loved one. A trust has several other advantages including avoiding the delays and expense of probate, maintaining privacy, saving estate taxes, and ensuring that your assets continue to be managed properly.

Wills and Trusts

A trust is advisable when you own your own home, own your own business, or have a great deal of liquid assets or investments. Also, if you have minor children, it is best to determine who will be their guardian and how any money that you have left them is to be used via a trust.

A living trust is the name given to trusts created during the settlor’s lifetime. A living trust is usually created for the settlor’s benefit during his or her life; after the settlor’s death, the trust assets are distributed to or managed for the benefit of family members or other designated beneficiaries.

Your living trust may be revocable (can be changed) or irrevocable (cannot be changed) depending upon your objectives. As conditions in your life change, such as health, family marriages, divorces, and births, you can alter or terminate a revocable trust at any time during your lifetime. A living trust that you create for your own benefit is usually revocable, contains safeguards in the event of illness or incapacity, and may continue after your death for the benefit of others. After your death, the trust usually becomes irrevocable. A trust can also be drafted to be irrevocable, meaning that it cannot be changed or revoked once it has been established. Unlike revocable trusts, one advantage of irrevocable trusts is that they can be arranged so that trust assets are not subject to estate taxes at the settlor’s death. Because of this attribute, life insurance is often placed in an irrevocable trust in a manner that will remove the policy proceeds from the insured’s taxable estate. Irrevocable trusts are also used to hold property for individuals who are unable to manage their own investments. While there are advantages to this type of trust, careful consideration should be given to its lasting effects before creating such a trust.

The living trust with the settlor as trustee is a popular variation of living trust. You may serve as the trustee of your trust while you are alive and competent and name a successor trustee to act in the event of your death or incapacity. Assets previously held in your sole name are registered in your name as trustee of the trust. If you become incapacitated, the successor trustee continues the administration of the assets for the benefit of you or your beneficiaries; after your death, the trust can continue for the benefit of others. All of the advantages of a living trust described below apply to a self-trusteed living trust.

Probate Avoidance – Probate is the process by which title to assets owned in your name alone are transferred after your death. Probate is often very expensive and time-consuming depending on the value and type of assets in your estate. Many assets, such as life insurance and property owned in joint tenancy, do not go through probate. Placing assets in a living trust is another method by which you can avoid the expense and delays sometimes associated with probate proceedings.

Guardianship and Conservator proceeding Avoidance – Even more costly and time-consuming than probate proceedings for decedents are guardianship and conservator proceedings for people who have become incapacitated. Through a living trust, you can plan for the management of your affairs should you become incapacitated and avoid court proceedings and the court-supervised management of your assets and affairs.

Privacy – When your estate goes through probate, your will and other documents become public record. A living trust provides you with a greater degree of privacy because the trust provisions and the assets in your estate are not subject to public disclosure.

Estate Tax Savings – If the value of your estate is more than the amount excluded from federal estate tax (in 2018, $5,600,000 and if over this amount taxed at 40%), it could be subject to estate tax when you die. A trust may enable you to reduce or eliminate estate tax through the latest tax saving techniques and ensure that more of your estate goes to the people or charities that you choose.

Proper Management of Assets – A living trust may also reduce the risk of inexperienced and unskilled management of property by allowing you to select a successor trustee to act in the future. Should you die or become incapacitated, the successor trustee takes over management of assets. In addition, the trust assets can be maintained in the trust after your death instead of being distributed outright to beneficiaries who may be unable to handle the management of assets themselves due to their age or other factors.

Yes. A living trust should be a part of a complete estate plan. A living trust is used in combination with a “pour-over” will to achieve flexibility in a total estate plan. A pour-over directs that assets owned in the individual’s name outside of trust are to be distributed (or “poured-over”) into the living trust established during the lifetime. An individual may, through a “pour-over” will, add securities and other property to a spouse’s or family member’s living trust. During the period of trust administration, all of the property is managed as a cohesive unit.

To achieve full benefit from a living trust, it is important that appropriate action be taken to transfer assets into trustee ownership. This process is often referred to as “funding” the trust. Funding a living trust consists of re-titling your bank accounts, bonds, stocks, real estate, and other assets so that the trustee of the living trust is the owner of the assets. Only assets that are titled in the name of the trust will avoid probate. Proper funding of a trust can also ensure that estate tax savings are attained. For a married couple with assets totaling more than the estate tax exclusion amount, tax savings can only be accomplished if each spouse has a share of the couple’s total assets set aside in his and her own estate. Failing to divide the assets will likely lead to all assets being included in the surviving spouse’s taxable estate and may result in substantial estate tax.

The trustee is responsible for ensuring that the trust is administered pursuant to the Trust Agreement. A trustee, particularly one who acts after your death or incapacity, should be available to handle all aspects of managing your assets and be willing to act for an extended period of time. A trustee acting after your death or incapacity must be able to recognize and anticipate potential problems and deal fairly and impartially with your beneficiaries.

Absolutely! Just be aware that a trust allows for more flexibility and control as outlined above. Discuss your estate planning goals with Harvey Legal Group, PLLC, and they will advise you as to the plan that is right for you.

Powers of Attorney – Health Care and Financial

By using a power of attorney, an individual (“principal”) appoints an agent to act for that individual to handle their affairs. In particular, there are health care powers of attorney that allow an agent to act for a principal for health care decisions and durable powers of attorney which enable an agent to make decisions for a principal regarding his or her finances.

Your agent would take over on handling your finances whenever you would like. It can be immediately, meaning that the agent can make any decision for you that you could make right now. This is often helpful to people who have a harder time with mobility to manage banking or even have trouble providing a signature due to physical limitations. Conversely, the power of attorney can be drafted so that an agent could step in and manage finances only while the principal is unable to do so. This could be for medical reasons, purposes of travel, or military duty.

A living will sets out an individual’s wishes regarding medical treatment and care should he or she become incapacitated and cannot make these decisions. Michigan has no court rulings or legislation that specifically permits or disallows a living will. Instead, Michigan law provides for a health care power of attorney that not only states and individual’s wishes regarding medical care and treatment, but also designates an agent that will make these decisions.

Everyone should have a health care power of attorney in place once he or she turns eighteen. Regardless of health or danger in employment, anyone can end up in a situation where he or she needs someone else to make those decisions. Also, make sure to keep it updated – if a couple is in the midst of a divorce, one would probably not want the other to make healthcare decisions for him or her.

Contact Harvey Legal Group, PLLC and they will set up an appointment to meet with you to discuss your estate planning objectives.

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This website was prepared for general information only based upon Michigan law at the time of posting. Everyone’s legal situation is different and the information provided may not apply to every situation. A review of this website, electronic communication through this website or e-mail correspondence to this firm does not constitute an attorney-client relationship.  Contact a professional to deal with the specifics of your situation.