Estate Planning

A well-drafted estate plan, typically including a will, a trust, and healthcare and financial powers of attorney, will go a long way to assuring that your loved ones have the tools and information necessary to carry out your wishes both during and after your lifetime. Having an effective estate plan in place will give you the piece of mind and confidence that you and your loved ones will be provided for in the manner you wish.

Wills

A will is the most traditional and widely recognized estate planning document. A will accomplishes some important objectives. It provides for the disposition of any assets that you own at the time of your passing which have not been conveyed to a trust or to a beneficiary or joint owner of the asset. In doing so, the will designates the person whom you wish to carry out these important tasks. Commonly known as an “executor”, this individual is now referred to as a “Personal Representative” under Michigan law. For families with young children, a will can also designate who you wish to serve as your children’s guardian(s) should you predecease them.

Although a will is a necessary part of estate planning, it has some critical limitations. There is a common misconception that if you have a will, you will not have to proceed through “probate”, the legal process for administering the assets of a deceased person. This is not true. Whether you have a will or not, if you die with any assets titled to you – i.e., not a trust or another entity – a probate estate will need to be opened. If you have a will, it will need to be admitted (or “probated”), and a personal representative will need to be appointed. The estate will then be subject to fees and various filing requirements, including an inventory fee, which is calculated as a percentage of your total assets. Your wishes and personal assets will also then become a matter of public record, with any person having access to view this information.

Trusts

Trusts are the most powerful and effective estate planning tool available, and are widely used by estate planning attorneys to accomplish important objectives for their clients. Most importantly, a trust provides for administration of your estate exactly how you want without the need for timely and costly probate proceedings. Your trust does not need to be filed with the court and, absent unusual circumstances, the court will have no involvement with the administration of your estate.

The most common type of estate planning trust is a revocable or “living” trust. With this type of trust, the person creating a trust – the “grantor” – conveys his or her assets to the trust, and will serve as the initial trustee with full control and use of those assets during his or her lifetime. Upon his or her disability or death, a successor trustee named in the trust will take over control of the trust and carry out its terms, including distribution of the assets to the beneficiaries listed in the trust. Importantly, a revocable trust can be changed or revoked entirely at any time prior to the grantor’s death or disability. After the grantor dies or becomes disabled, however, the trust becomes irrevocable and must be carried out exactly as provided in the trust.

A common misconception about trusts is that they are only for the super-rich. This is simply not true. Regardless your financial situation, a trust acts to carry out your wishes just as you want without court intervention or burdensome legal wrangling for your loved ones. Indeed, trusts are especially beneficial for young families who may not have significant assets but have minor children who will need to be properly cared for in the event of the death of the parents.

Powers of Attorney

Financial

Financial powers of attorney are a critical aspect of estate plans which act to empower an agent to act on your behalf in the management of your financial affairs. There are two types of financial powers of attorney – “springing” powers, and those that become effective immediately. Springing powers only become effective if and when you are determined to be incompetent. Given the potential complications and delays with obtaining a determination of incompetence, springing powers are typically not recommended. Instead, giving someone you trust a power of attorney that becomes effective immediately is usually the recommended course of action.

A well-drafted financial power of attorney will provide your selected agent broad authority to carry out financial transactions and management on your behalf, including managing bank accounts, writing checks, paying expenses, signing contracts, procuring needed services on your behalf (including medical service), among a broad array of other tasks.

An agent under a power of attorney has strict fiduciary obligations in acting on the principal’s behalf. Under Michigan law, a fiduciary such as an agent under a power of attorney owes the highest duty of care under the law, and has strict obligations to act in the best interest of the principal. A power of attorney who violates these important obligations can be removed by a probate court, surcharged for their improper acts, and may be replaced by a court-appointed conservator.

Healthcare

A healthcare power of attorney is another important tool in planning for your future. A healthcare power of attorney gives a selected individual authority to make decisions, consent to treatment, and obtain information regarding your medical care in the event you are unable to act on your own behalf.

Without healthcare and financial powers of attorneys, in the event you require management of your finances or decisions about healthcare, your loved ones will likely be forced to petition a probate court for appointment of a guardian and/or conservator to manage your affairs and make decisions. These proceedings can be costly and lengthy, especially where your loved ones cannot agree on who should serve in these roles. In addition, the court may elect to appoint a third-party “professional” guardian or conservator instead of family or friends. While these individuals are often highly experienced and knowledgeable in caring for the elderly and disabled, they are usually not ideal, and their fees and costs, which will be paid from your estate, can be very high.

With financial and medical powers of attorney in place, you are put in control now, while you are of sound mind and body, of who will assist you in your time of need. You and your loved ones will not be at the mercy of the court, and decisions can be made effectively and efficiently about you and your affairs. For these reasons it is recommended that all estate plans contain these instruments.

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