ESTATE PLANNING



Essentially, estate planning means preparing for one's death or incapacitation. Well-drafted Wills and Living Trusts should comprehensively set forth your desires regarding the administration and distribution of your assets upon your death as well as making clear your wishes about other matters, such as the appointment of a guardian or co-guardians for minor children or your wishes concerning the disposition of your body following your death. Everyone should have a Will. Depending on your circumstances, you probably should have a Living Trust as well. Many people mistakenly believe that a Living Trust is "just for rich people". in years gone by a Living Trust WAS often used to help minimize Federal Estate Taxes. Today Federal Estate Taxes are only an issue if an estate is worth many millions of dollars. Nowadays therefore Living Trusts are used primarily as a tool to help avoid the Probate Court process. Most people want to avoid probate because doing so is private, more efficient and less costly. Living Trusts are most often funded by real estate assets (your house) and personal property (the contents of your house), so that those assets do not need to go through the Probate Court process after you die. Other tools, such as the use of beneficiary designations for certain assets, are also used to help avoid involving the Probate Court following a person's death.

In a Will, it is essential to name who you want as your Personal Representative of your Estate if there are assets that need to go through the Probate Court process following your death. If you are married, presumably you and your spouse will name each other. The Personal Representative (formerly the "Executor") is the person who is authorized by the Probate Court to administer a decedent's estate. This person has the authority to sell property, pay debts and distribute the assets to the persons named in the Will to receive the assets. You should also name at least one alternate person to serve in this capacity in case your first choice is unwilling or unable to serve.

In the case of a Living Trust, the person or people (if a husband and wife) creating the Trust will be the original Trustees of the Trust. Following the death of the original Trustee or Co-Trustees the person creating the Trust will name a Successor Trustee who will administer the Trust much in the same manner as the Personal Representative named in a Will. It is very important to name responsible people for these roles, especially if children are named to receive assets in a Will or in a Trust. When a person makes a Will or creates a Trust and wants property to go to his or her children following their death, they may designate the age or ages at which the children are to receive their inheritance. For example, the Will or Trust might designate that upon a person's death, the property would be divided into equal shares with one share for each child. The Will or Trust could then provide that when a child attains the age of 21, the child will receive one-half of his or her share of the property and that when the child turns 25, he or she will receive the remainder of his or her share. Most people will also provide that the Personal Representative or successor Trustee can use as much of a child's share of an inheritance for the child's support and education prior to the child attaining the age or ages designated for distribution.



fred@fahrnerlaw.com
fred@fahrnerlaw.com

ESTATE PLANNING COST MYTH



ALLOW FRED TO GIVE YOU A FAIR ESTIMATE



Many people are under the impression that estate planning is extremely expensive. It is true that many law firms prepare a thick, fancy binder full of documents and charge well over $1,000. Unless you have an extremely complex estate, the preparation of an estate plan should cost well under $1,000. Most of the documents in that thick binder are templates containing mostly boiler plate language that are used over and over again and are prepared by legal assistants. Do not needlessly overpay for the preparation of your estate plan give Fred a call or drop him an email.



Tools for avoiding probate



Including Funding Your Living Trust



The main reason that people create a living trust is to avoid probate - or to keep probate to the absolute minimum. A secondary reason is to have someone (a trustee) manage your property for you if, for medical or other reasons, you can't do it yourself. And wealthy people may use a trust (or a pair of trusts) to avoid or reduce the federal estate tax. For a trust to be an effective shield against unnecessary probate, you need to transfer property into the trust while you are alive, or arrange for property to be automatically transferred into it upon your death. Here are some suggestions for doing that.
Your Home. You can transfer your home into your living trust by using a deed. The deed transfers legal title from you (or from you and your spouse, if you're married) to you (or to you and your spouse) as trustee or trustees of your living trust. Typically, a lawyer prepares the deed, which is then recorded with the county register of deeds. This transfer has no income tax or property tax consequences. You will, however, need to file a property transfer affidavit with your city or township tax assessor. And you should ask your home insurer to add the trust to your insurance policy as an additional insured party.

Contents of Your Home. Through an attachment to your living trust, you can place in your trust the contents of your home, whether there now or acquired later. Your lawyer can help you with this. Again, ask your homeowner's insurance company to add the trust to your insurance policy as an additional insured party.
Other Tangible Property. For property not inside your home, you can transfer title through a simple document called an "assignment" - though this won't work for vehicles, boats or other items that require ownership registration with the state. Usually, it is not a good idea to transfer vehicles into a trust.

Brokerage Accounts. Your broker will have a form you can sign to transfer your accounts to your trust.

Individual Securities. Generally, you'll need to work through the transfer agent named on the stock certificate. In most cases you have a choice: You can put securities in the name of your trust, or you can add a Transfer on Death (TOD) designation. With a TOD designation, the securities will be transferred to the trust when you (or you and your spouse) have died there will be no need for probate. If you use the TOD method, consider signing a Durable Power of Attorney so that the person you name as your agent can get access to the securities if you become disabled and cannot do it yourself.

Bank Account. Your bank will have the necessary forms. As with individual securities, you usually have a choice: You can put the accounts in the name of your trust, or you can add a Pay on Death (POD) designation. With a POD designation, the bank accounts will be transferred to the trust when you (or you and your spouse) have died. There will be no need for probate. Most people prefer the second method. If you use the POD method, consider signing a Durable Power of Attorney so that the person you name as your agent can get access to the funds if you become disabled and cannot do it yourself.
Assets with a Named Beneficiary. This includes life insurance policies, retirement plan assets, IRAs, Keoghs, and annuities. You won't put these assets in the name of the trust. Instead, you will name the trust as the beneficiary or contingent beneficiary. The insurance company or plan administrator can supply the necessary forms. BEFORE YOU NAME THE TRUST AS THE BENEFICIARY OF RETIREMENT ASSETS, CHECK WITH A TAX ADVISER.

Business Interests. If you are a sole proprietor, a partner, a shareholder in a small corporation, or a member of an LLC, it's often possible - and desirable - to transfer your ownership interest to your living trust, or to arrange for its automatic transfer upon your death. You will probably need a lawyer's help in doing this.

Assets You Should Not Transfer. Transferring certain assets to your living trust can lead to unfavorable tax consequences. These assets include employee stock purchase plans, and some employee incentive stock option plans. Get advice from your tax adviser before transferring such assets.

Your Will as a Fail-Safe. You can have a "pour-over" clause in your will to deal with property that you haven't transferred into the trust - or arranged to have automatically transferred. With such a clause, the property will eventually be transferred to your trust, but it first will have to go through the probate process.



making plans in case you become unable to handle your own affairs



Often Living Wills/Advanced Directives and Powers of Attorney for Health Care are combined into just one document that both makes a person's health care wishes known and appoints a Patient Advocate. If a person becomes unable to participate in making his own health care decisions and does not have a Living Will/Health Care Power of Attorney in place, a Probate Court proceeding for the appointment of a guardian to make medical decisions is usually necessary.


Living Will/Advanced Directive - A Living Will, sometimes called an Advanced Directive, is a document that gives instructions concerning the kind of care a person wishes to receive if they become incapacitated to the point they are unable to participate in making their own medical decisions. Most importantly, a Living Will describes the circumstances under which a person would not want to be put on or kept on life support.


Durable Power of Attorney for Health Care - A Designation of Patient Advocate document, sometimes called a "Durable Power of Attorney for Health Care", is a document that contains the nomination of a person to serve as Patient Advocate for another person. A duly-appointed Patient Advocate is someone who makes medical decisions for another person who has been deemed unable to make their own medical decisions.


Durable Powers of Attorney - A Power of Attorney is a document where a person appoints someone known as their "Attorney in Fact", to handle their financial affairs for them if the need arises. This document empowers the person who is appointed to stand in the shoes of another person and handle their financial affairs just as the person could have done things for himself or herself. Most people want what is known as a "springing" power of attorney, which provides that the power of attorney only becomes effective if a medical determination has been made that the person is unable to act for themselves. If a person becomes incapacitated and does not have a Power of Attorney in place, a Probate Court proceeding for the appointment of a Conservator is usually necessary.



Fred Fahrner
Attorney at Law
203 South Zeeb Road, Suite 206
Ann Arbor, MI 48103
734.665.1162
fred@fahrnerlaw.com