Most Americans die without having a Will or other estate plan in place – despite the fact that most people say they’d prefer to save their heirs the time, expense and taxes that quickly pile up. Add blended families, children who don’t get along, intended heirs who are not your closest relatives as defined by the state, a husband and wife who came into the marriage with separate property, and the likelihood grows that the wrong people will get your assets. There is only one solution for this: plan now.

Writing the Will

Almost everyone needs a Will. If you have children, a Will names guardians for them in the unlikely event that you and your spouse die at the same time. If you don’t have children, a Will ensures that your money and personal property go to the people you choose.

Even if you rely on a Trust instead of a Will to specify where your assets should go, a Will deals with any property you might forget or be unable to put in a Trust. Be aware, however, that a Will doesn’t keep your estate out of probate.

Should you avoid probate?

Probate is the court process following a person’s death to prove authenticity of the Will, appoint someone to handle the affairs (pay bills and taxes), and identify, inventory and distribute the assets. Many people decide to avoid probate because it’s time consuming (6-18 months), costly and makes the details of your estate public.

So why wouldn’t you want to avoid probate? If you look at your situation and see lots of creditors and warring heirs, probate can be helpful. Probate is designed to bring order out of chaos – a judge can effectively tamp down on warring parties long enough to get done what needs to get done.

Free ways to bypass court

While some ways to avoid probate require an attorney, others are within your control – and free. You can keep bank, brokerage, mutual-fund and retirement accounts out of probate by simply filling out a “payable on death” form. You can also pass investment or retirement accounts or insurance policies to heirs by naming a beneficiary. As long as the beneficiary survives you, the assets go directly to that person, bypassing probate.

A word of caution: keep your beneficiary designations up to date as your wishes change. These designations can’t be changed by a Will or Trust.

Some people try to avoid probate by adding their children’s names to the house title, stocks, bank accounts, etc. The joint ownership will, indeed, avoid probate court, but it causes other problems. For example, if you have joint ownership of your home with your children and you sell your home while you are alive, your children will have to pay capital gains tax on a portion of the sales proceeds. Additionally, you cannot sell your home unless any children on the deed agree to the sale and sign the deed transferring the home to the new owner. Even if the house is not sold until after your death, the children on the deed may still end up paying a substantial tax on the capital gain from the sale.

Is a Trust for you?

One of the most popular estate planning tools is called a Revocable Living Trust – a legal entity that you can make the owner of your assets. In the document that creates the Trust, you spell out how your assets should be disposed of after you die and name a trustee (generally yourself) to manage the assets in the Trust while you are alive and well.

You also name a “successor trustee” to manage the assets when you can’t, including after your death. If you’re married, generally one spouse is the trustee, and the other spouse is the successor trustee. When the first spouse dies, the survivor updates the document to add a child or trusted advisor to act as the next successor trustee.

With a Trust, only you, your trustees and heirs need to know details of your estate. Nothing is filed in court because you do not own your property, the Trust does. In addition, the IRS “forgives” all capital gains on the sale of property when your property is held in trust and later distributed pursuant to the terms of the trust.

Tying up loose ends

Help your heirs make sure all your bills get paid and all assets are accounted for by jotting down your assets and debts. Give that list to your trustee or attorney or tell your heirs where they can find the list.

Many experts also suggest that you fill out an advance healthcare directive, in which you designate someone to make decisions about your medical care in the event that you become incapacitated. The directive also allows you to specify your wishes under certain medical circumstances.

Living Will vs. Designation of Patient Advocate

A Living Will or Advanced Medical Directive is a document that outlines in detail the medical decisions and treatment preferences you would like medical staff to follow in case you become incapacitated. They are touted as a way for you to participate in your medical decision-making even when you are no longer able to make your preferences known – a way to control your end-of-life care.

Living Wills are not legally binding in the state of Michigan, so even if medical staff had access to it, they are not bound to follow its dictates. Fortunately, there is a life planning tool that allows you a certain measure of control over your care if you become incapacitated: Designation of Patient Advocate (DPA).

In a DPA, you appoint the individual of your choice to make medical decisions on your behalf if you are unable to do so. You have to be declared legally disabled before this authority is available, and it is revoked when you regain the capacity to participate in decisions about your care.

A DPA can provide some guidance to your patient advocate about your care preferences. In particular, if you wish to give your patient advocate the power to stop life-sustaining care, those instructions need to be written explicitly into your DPA.

You can also give your patient advocate authority to make mental health treatment decisions. Without this, if mental health treatment is necessary, a family member would have to go before a Probate Court judge and request to be appointed guardian. While you can use Living Will forms as a springboard to discuss your wishes with your patient advocate, in Michigan, a DPA is the better life planning tool.

Lead Attorney

Brian J. Plachta, Attorney, with more than 20 years of experience in Estate Planning, Elder Law, and Business, Corporate, and Real Estate Law.

Long-term Care Planning

Family members provide 80 percent of the care for aging parents in this country, providing an average of 21 hours of care per week (1,080 hours per year). Whether the caregiver is the typical (a 46-year-old woman who works outside the home) or a son or even several siblings working together, the financial costs to those doing the day-to-day caring is significant.

Seniors also decide to use the services of assisted living facilities or home health aides. This brings up issues of Medicaid planning and VA pension benefits. There are many options available for families to consider, both financial and legal, as they plan for long-term care. Call 616-458-3994 to begin the conversation.

Our Team

Brian J. Plachta, Attorney, with more than 20 years of experience in Estate Planning, Elder Law, and Business, Corporate, and Real Estate Law.

Richard J. Cross, Government Benefits Specialist, with more than 30 years of experience as a Social Security claims representative and VA eligibility service officer.