Estate Planning Topics

What is Estate Planning?


Estate planning is a process to decide what should happen to you and your things in case of death or incapacity. Using this, legal documents can be put in place to make sure the decisions you make now will be carried out later. 

Think of it this way: a estate plan is "people and decisions insurance" that you put in place up front, so when something happens later (death or incapacity), the people you've already chosen can jump into action to make the decisions you've told them in advance how to make. 

Why Do I Need Estate Planning?


If you don't have an estate plan, the people you are close to may not be prepared or able to help you if you become incapacitated or pass away. Sudden incapacity or death is hard on loved ones, and can result in needless uncertainty, conflict, stress, and expense while people figure out what needs to be done and how to help. 

On the other hand, if you have an estate plan, you can provide directions in advance so the people around you know who does what and what is supposed to happen in case of your incapacity or death. For example: 

  • Who should make health care decisions for me and make sure I get the medical care I want, if I'm unable to do that for myself? 
  • Who should make financial decisions for me and make sure my property, debts, and investments are taken care of the way I want, if I'm unable to do that for myself? 
  • Who should be the person(s) to make sure my kids are taken care of the way I want, if I can't do it myself?
  • Who should get my things if I pass away, and who is a person I trust to make sure these kinds of wishes are carried out after I die?
  • Do I need to do any Medicaid planning before I get older, so I can preserve my assets for my spouse or family members?
  • Do I want to give my relatives, doctors, and the courts instructions about what kind of end-of-life treatment I do and don't want?
  • Do I want to leave money to a church, school, or other charity when I pass away?
  • Do I need to set up a trust to avoid probate after I pass away, or are there other options I can use to avoid probate instead?
  • Do I want to make gifts to relatives or do other taxable estate-reduction planning before I die, so my relatives won't have to pay estate tax?
  • Can I set up a special needs trust to help provide a better quality of life for a relative or friend on government assistance, without disqualifying them from their government benefits?

These are some of the questions that can be answered using estate planning, saving the people closest to you from unnecessary uncertainty, conflict, stress, and expense. 

What Are Some Common Pieces of an Estate Plan?


Some common pieces of an estate plan include:

  • Patient Advocate Designation. This empowers a person of your choice to make medical decisions for you if you become incapacitated, and gives that person instructions about the medical care you do and don't want.
  • Durable Power of Attorney. This empowers a person of your choice to make financial decisions for you if you become incapacitated, and gives that person instructions about how they should handle your property and affairs for you.
  • Nomination of Guardian for Minor Children. This tells the court who you want to have care and legal custody of your children, in the event you are no longer able to take care of them. 
  • Last Will and Testament. This gives instructions on how you would like your property to be distributed after you pass away, and who will be responsible for carrying out your wishes after you die.
  • Living Will. Similar to a Patient Advocate Designation, this is a document that tells third parties what kind of medical treatment you do and don't want (not legally recognized in Michigan, but may be recognized in other states).
  • Revocable Living Trust. This is a document that creates a fictional entity (the "Trust") to hold property, so the property can be owned by the trust and not by you personally. While you are living, you can be the trustee of the trust and maintain full control over the property. After you pass away, the trust becomes irrevocable. These types of trusts can be used to avoid probate.

What Is a Basic Estate Plan?


There is no such thing as a one-size-fits-all "basic estate plan." An estate plan is drafted to meet the needs and wants of the client, and just as no two people are exactly alike, no two estate plans are either. 

That said, an entry-level estate plan might consist of: 

  1. Last Will and Testament to say who should get your things after you die. A Nomination of Guardian for Minor Children can be included in the Will; 
  2. Patient Advocate Designation to provide for health care decisions in case you become incapacitated; and 
  3. Durable Power of Attorney to provide for financial/property decisions in case you become incapacitated. 

As discussed above, whether this entry-level estate plan is right for you depends on your specific circumstances. An estate plan that is right for you could be more than - or less than - what we've described here. Ask us: we can help you decide what kind of estate planning you need and what is right for you.

How Much Does an Estate Plan Cost?


Like we said before, there is no one-size-fits-all "basic estate plan." The cost for your estate plan will vary depending on your specific situation, needs, and wants.

That said, our basic estate plan (package of Last Will and Testament with Nomination of Guardian for Minor Children included, Patient Advocate Designation, and Durable Power of Attorney) starts at $750 for one person. Estate plans for two people increase the complexity, and cost more. Individual documents can be purchased for a per-document flat fee. Ask us: we can help you decide what kind of estate planning you need within a budget that is right for you.

How Old Do I Need to Be to Have an Estate Plan?


There's no minimum age needed to have an estate plan. But generally, a person should be an adult to make an estate plan. When you turn 18, you become solely legally responsible for yourself, and no one else has the power to make legal decisions on your behalf unless (A): you have estate plan documents in place; or (B) a court has appointed a legal guardian or conservator for you. For this reason, we suggest that anyone who is an adult should have some sort of estate planning done. This helps to provide certainty for friends and loved ones in case something happens to you, and avoids the delay, expense, and possible conflict that might come with having to get the courts involved in making decisions for you. 

More Estate Planning Topics

Can Estate Planning Documents Be Changed?


Yes. You can change your estate plan anytime, with a few exceptions. 

Estate plans are drafted with flexibility in mind, because we don't have a crystal ball about the future. But sometimes life and circumstances change, and the choices made in a previous estate plan are no longer the choices you want going forward. This can happen, for example, because of the birth of a child; marriage; divorce; re-marriage; change in family relationships/dynamics; inheritance; significant change in financial status; change in law; or for other reasons. Also, because people and circumstances change throughout life, it's a good idea to review your estate plan with an attorney every couple years to make sure it is still up-to-date and reflects your wishes.

That said, there are some exceptions to changing estate planning documents. The first general exception is if you have made a trust or other document which, by its terms, is irrevocable. The second general exception is if you have lost mental capacity since the time you made your last estate plan. The mental capacity needed for making an estate plan differs, depending on the type of estate plan document. Most documents require contract capacity, which means you cannot be legally incompetent to make a trust, power of attorney, patient advocate designation, and so on. On the other hand, a will requires testamentary capacity, which is a lower standard. Testamentary capacity means that the person making the will knows the extent of their property, they know the object of their bounty (i.e. who their family and heirs are), they know they are making a will, and they intend to convey their property by will. The decision whether an estate plan can be changed is a case-by-case decision made by the client and attorney, depending on the client's specific circumstances. Sometimes a doctor's note regarding mental capacity can be used to establish capacity needed to change the estate plan. If you have questions about whether you can change or make a new estate plan, ask us: we can help you decide whether changes to your estate plan are appropriate. 

Do I Need to Have a Lawyer to Make an Estate Plan?

Image of a lawyer on courthouse steps with the head of a golden retriever

Strictly speaking: no. You can write your own estate plan, if you know the law, and your estate plan is signed with the proper formalities. But most people don't know the law, and don't know how to make sure the documents they sign are properly made so they cannot be challenged in court. For this reason, having a lawyer draft your estate plan is highly desirable, if not indispensable.

Why are lawyers lawyers? Because the law is complicated. Who makes the laws? Lawyers, mostly. The United States constitution says that anyone is entitled to represent him- or herself in court. But is that a good idea? Generally, no.

As the saying goes, "A man who is his own lawyer has a fool for his client". Ladies, I'm talking to you too. The bottom line is that   

legal rules are complex and arcane, and the task can be challenging for one trained in the law, let alone one who has no formal legal education or experience. In this case, the phrase means "This is tough stuff. Pitfalls abound for the unwary. You would be foolish if you try to represent yourself."

So no. There's no law that says you have to have a lawyer write your estate plan. There are laws that say if you have someone else write your estate plan for you, that person has to be a lawyer. But the reality is that a trained, experienced estate planning lawyer can help you make sure that your estate plan accomplishes your wishes, and will stand up if it's ever challenged in court. 

How Can I Keep My Estate out of Probate Court?

Image of a gavel with a red circle and line through it, depicting "no court"

When you pass away, everything that you still own in your personal name becomes property of your probate estate. In order to keep your estate from going through probate court, you need own nothing (or very little) in your personal name when you die. Let's look at a couple ways to do this.

First, the traditional estate planning way of avoiding probate was to do a revocable living trust. A trust is a legal entity separate from your own personal identity, and a person can transfer any property they own (such as homes, cars, investments, etc.) to the trust. Because these things are titled in the name of the trust, they are no longer owned by the person when the person dies. Ideally, when that person dies there are no probate assets to administer - they are administered through the trust instead. The drawback with this is, trusts are complicated and expensive to set up. They also need to be funded, and continuing attention and maintenance is required to make sure all property is properly titled in the trust's name until death. Most ordinary people just aren't up to this task, so many trusts begun with good intentions never give their owners the results they were looking for, and their estates end up going through probate anyway for property that never made it into the trust. 

Because of the complexity and expense of trusts, the modern trend is for states to pass laws that allow various types of property to pass at death without needing a probate proceeding. For example:

Real estate: An alternative to putting real estate in trust is to hold it under an Enhanced Life Estate Deed, commonly known as a Lady Bird Deed. Under one of these, the grantor conveys the property to him/herself in life estate with a continuing general power of appointment over the property, and at death the remainder interest in the property passes to the remainderperson in fee simple. 

Automobiles: In Michigan an heir/family member can transfer title to an automobile from the deceased's name into their own, subject to certain value limitations, if there will be no probate estate. 

Bank accounts: Many bank accounts today can be held  in Transfer On Death (TOD) or Payable On Death (POD) form. This means the account owner maintains full ownership of the account until death, and upon death, ownership of the account passes to the named transferee.

Insurance and Retirement Accounts: These accounts commonly have beneficiary designations. A beneficiary is a person to whom the account will pass at the account owner's death. It's very similar to a TOD or POD, discussed above. However, it's very important to name primary and secondary beneficiaries, and to keep these updated so that when the account owner dies, there is a living beneficiary to whom the account can pass. If there is no living beneficiary, then the account will become part of the account owner's probate estate.

Business interests: A well-planned business will have an LLC Operating Agreement or Corporate Bylaws that address the issues surrounding death of an owner, and management succession. If the organizational documents of the business address it, the business's ownership interest passes to named or readily identifiable persons by operation of contract law, not probate. This is sometimes referred to as a Buy-Sell Agreement and Management Succession Plan. It helps to have a good lawyer to set this up.