Author: Michael

My First Legal Zoom “Estate Plan” Review

September 18, 2011 / Michael

Well, this past week I reviewed my first “estate plan” from legal zoom. I’ve read about others’ reviews. In fact, I even referenced an article on do-it-yourself planning in a previous blog post. This, however, was my first look at a legal zoom estate plan for a potential client who wanted me to review it. I have to give this person a lot of credit for being willing to have it reviewed. To not just assume that everything was right (like many people), and to have an open and honest discussion about what it was . . . and more importantly, what it was not.

I’m not going to detail every question I had, every shortcoming of the plan and everything that was not how my potential client wanted it to be. To do that would take far too much time and you wouldn’t want to read all of it anyway. Instead, I will highlight a few of the items. To be fair, these are not just my thoughts as an estate planning attorney. Each of these items is something the potential client wanted changed because it didn’t work how he wanted it to. But how would he have known that while filling out the legal zoom questionnaire? He wouldn’t . . . more on that later.

Here are the biggest issues we came across while discussing the Legal Zoom “estate plan:”

It wasn’t a comprehensive plan – it was just a living trust and a pour-over will. At a minimum, he should have also had a financial power of attorney and a healthcare power of attorney. Although the powers of attorney are important in every estate plan, they are particularly important in this gentleman’s situation due to his health condition. Sure, it could be that he chose only the trust/will combination while going through the Legal Zoom online questionnaire, and it shouldn’t be considered Legal Zoom’s fault that he did that. I’m not saying it’s anyone’s “fault,” but the fact is, without a good discussion about what estate planning is, what it is not, what is most important to him and what planning is needed to carry out his wishes, how could he have known?!
This is probably second only to the one above. He had listed several people he wanted to receive varying shares of his estate. If someone passed away before they received their share, he wanted it to go to their children or, if they had no children, to the others he had listed. UH OH – that’s not what the trust said. It said that if any of the folks passed away, it would go to his “heirs” according to Michigan law, many of which were not people on his list and many who would receive much more than he wanted!
There was no HIPAA authorization. This means that although he wanted a living trust to help keep his affairs out of court during life and after death, someone would have to go through the court process to be appointed as guardian if they needed access to his medical records. Definitely not what he wanted.
Neither the will nor the trust had a reference to a written list of personal property. This would have allowed him to say who received what of his personal belongings without him having to change the will/trust each time. Honestly, I can’t remember reviewing a Michigan estate plan in the past few years that did not have this provision. I see this as a miss on Legal Zoom’s part.
There were several typos in the documents (for example, the signature section for the trustee had all the trustees names under the signature line written like it was one long name . . . one very long name!). I don’t know if this was user error or programming error. Either way, it was a typo. Have I seen typos before? Sure, attorneys are humans too and we make mistake sometimes. However I’ve never seen one that blatant.
Finally, although he had a living trust, it was not “funded.” That means that the trust didn’t own anything (read my blog post on the topic here). Ultimately, this meant that although he wanted to avoid the probate court process when he passed away, that would not be the case. Everything except his life insurance would go through the probate court process before it ended up in the trust and the life insurance would all go to one individual. See #2 above for why that would be bad.

Please know that the above list is by no means exhaustive. That is the list of the things that bothered my client the most. Oh yeah, notice how I changed the phrase to “my client?” He’s a client now. He wanted to make sure his estate plan was unique to his family situation and that it would work when needed . . . he didn’t feel the Legal Zoom “estate plan” did that.

I think he summed it up best at the end of the Peace of Mind Planning Session when he said, “wow – well, I guess I just didn’t know what I didn’t know. I’m glad I had you review it.”

If you have a “do it yourself” estate plan (Legal Zoom or otherwise) and would like the added Peace of Mind of having it reviewed, call us at 616-827-7596. The review is free and there is no obligation. Why leave it up to chance? Give us a call.

Michael Lichterman is an estate planning and business planning attorney who helps families and business owners create a lasting legacy by planning for their Whole Family Wealth™. This goes beyond merely planning for finances – it’s about who your are and what’s important to you. He focuses on estate and asset protection planning for the “experienced” generation, the “sandwich generation” (caring for parents and children), doctors/physicians, nurses, lawyers, dentists, professionals with minor children, family owned businesses and pet planning. He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients – many of which have become great friends.

What Are Michigan Articles of Organization?

September 4, 2011 / Michael

You may have read my previous post on LLC Operating Agreements and thought, “that’s not the first step, is it?” Well, no, it’s not. The first step in legally forming a business should be to meet with a Michigan business lawyer to get the critical advice and help you need to make sure you get the full, legal benefits of forming the business.

The first documentation step in forming a Michigan Limited Liability Company (LLC) is to draft and file Articles of Organization (the “Articles”). Filing the Articles means that the business entity officially “exists.” Although the Michigan Limited Liability Company Act (the “Act”) doesn’t require a particular form for the Articles, it does set out what information is required in the Articles. For example:

The name of the LLC,
The purpose(s) for which it is formed,
The street and mailing address for the LLC’s registered agent,
Whether the LLC will be managed by a manager or by the members, and
How long the LLC will last.

Generally, I favor using the form from the State of Michigan Department of Licensing and Regulatory Affairs (click here for the form). Don’t let the simplicity of the form fool you. There are many important decisions that need to be discussed and decided with a Michigan business lawyer before knowing whether or not the state form is sufficient for your particular business. And in certain cases it is better to use custom-drafted Articles rather than the form, to make sure your goals and objectives for the business are accurately represented.

Have questions about getting your business “off the ground?” Want to make sure that your existing business was set up to give you the maximum protection and help reach your full potential? Call us at 616-827-7596 and schedule your business needs analysis meeting to have added peace of mind.

Michael Lichterman is a relationship-based business attorney who leverages his business, marketing and legal knowledge to help business owners and entrepreneurs create a Foundation for Business Success™. This goes beyond merely drafting a set of documents – it’s about proactively preparing the business and the business owner for continued growth while remembering the “human side” of running a business. He best serves small business owners (less than 50 employees) and entrepreneurs. He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients and their businesses – many of which have become great friends.

The Critical Importance of Estate Planning for Women

August 28, 2011 / Michael

I recently ran across this Forbes.com article about how critically important estate planning is for women. The article points out how women have been responsible for many accomplishments throughout time and how many of them have become quite successful by any standard. Yet, even with their increased stature and accomplishment, it seems few have taken the time to do proper estate planning. The article gives a very interesting statistic comparing weight loss and estate planning . . . you’ll have to read it.

Some of the reasons pointed out in the article for women to do estate planning right now are:

Women are more likely to live longer,
Married women are more likely to outlive their spouse than are men,
“Traditional” estate planning seems to minimize the role of women in the planning, and
Your children could very well be lost in the shuffle and end up with caregivers you would not want if something happened to you.

As a Grand Rapids, Mi estate planning lawyer many of my clients have expressed one or more of the above concerns when discussing their planning. As with most estate planning articles I read, Ms. Jacobs points out the importance of naming guardians in your Will for your minor children. And like most articles, she stops there. Well, if you want to help ensure that your children don’t end up in the arms of strangers for any period of time, you need to do much more than just put guardian nominations in your Will. That’s why all of my clients with minor children have a Children Protection Plan.

And is typical of estate planning articles, the focus is on financial assets. No matter what your age, children or no children, married or not married, you should look far beyond the financial assets and work with a Michigan estate planning attorney who can help you plan for your Whole Family Wealth – not just what you have but also who you are! All women have valuable values, insights, stories and experiences that should be shared with family, friends and acquaintances. And yet, the one thing that is lost when someone passes away – the non-financial assets – is the thing that “traditional” estate planners overlook.

To all the women reading this, please read the article. Then read it again in light of this blog post. After reading both, why wouldn’t you “take charge” and move forward with your estate planning? Your family’s future could very well depend on you!

What Is a Michigan Benefit Corporation?

August 21, 2011 / Michael

Short answer – nothing . . . yet. You see, as a Grand Rapids, Michigan business lawyer I try to keep my “ear to the ground” when it comes to the future of business law – both here in Grand Rapids, Mi and nationally. There seems to be a growing national trend for state business laws to allow a “Benefit Corporation.” Five states already have such laws and Michigan is one of six states currently considering enacting B Corporation laws.

Generally speaking you can currently form two types of Corporations in Michigan – for profit or non profit. Yes, there are more, but those are the two most common. For profit Corporations can then elect to be treated as either a C Corporation or an S Corporation for tax purposes. Please note that you don’t “form” a C Corporation or S Corporation – that is a tax election (and a topic for a future blog post).

Benefit Corporations would function the same as C Corporations in terms of taxation, but would give businesses the fiduciary duty to consider non-financial interest when making decisions and require accountability through annual reporting. This is mainly accomplished and carried out by appointing a “Benefit Director.” The driving cause behind the Benefit Corporation is providing a way for business Corporations to further environmental, sustainability and other goals without running afoul of Director fiduciary responsibilities.

You see, Directors are legally obligated to act in the best interest of the Corporation’s shareholders. This could leave them open to the threat of lawsuit from one or more shareholders if they make a decision that is more mission driven (e.g. good for the community with potentially little or no benefit to the shareholders). Forming as a Benefit Corporation would not only allow for those types of “greater good” decisions but also hold them accountable via a Benefit Director and Benefit Officer(s), annual reporting and a shareholder right to enforce a higher standard of action.

If you are interested in reading the proposed legislation, you can find it here: Senate Bill 359, Senate Bill 360, House Bill 4615, and House Bill 4616.

I can see this being of particular interest here in West Michigan. We have a remarkable reputation for incorporating sustainability into our businesses and lives and for having a focus on the “greater good.” I’m looking forward to monitoring developments on Benefit Corporations in Michigan and will post again with any updates.

3 Critical Documents Every College Student Needs

August 14, 2011 / Michael

I’m constantly reading books, articles and blog posts in the national media as well as those by colleagues of mine. I recently ran across this terrific post by my colleague Rania Combs. If the name sound familiar, it should. This isn’t the first post I’ve referenced by Rania. There was this post several months ago.

Many people think they need kids, money or age to need estate planning. As I referenced in this post, everyone has an estate and needs estate planning – that’s why the government made one for you. That includes college student. That’s why Rania’s post caught my eye. Check this Facebook post out:

That is a real Facebook post that starts off Rania’s post. I’m not going to re-hash the whole post here because I think it is well written and you should read it in it’s entirety. I will point out the 3 key planning documents every student needs before going back to school:

(1) Durable Power of Attorney
(2) Medical Power of Attorney / Patient Advocate Designation
(3) HIPAA Release / Authorization

Don’t let your college student’s emergency care be restricted by school policy. Call us today at 616-827-7596 to make sure these critical documents are in place. And if you have questions, call or email us – we’re happy to help.

The Importance of Updating and Reviewing Your Estate Plan

August 7, 2011 / Michael

As a Grand Rapids estate planning attorney I am privileged to meet with great families and to hear their stories. Some of those stories are just starting, some have a good portion already written, and some have been finished. If you’re familiar with me or my previous posts, you will understand why the stories are so important to me and to the type of planning I work on with clients (read previous post here).

This past week I met with a couple that has a truly remarkable life story. We spent the better part of our meeting having them share the story they’ve written so far and how we could make sure their estate plan would help them write the rest of their story during their life and after they pass on.

During the conversation I discovered that they had previously done planning with another attorney over 20 years ago. And guess what? Their plan had not been looked at, reviewed or revised since then. Some of the documents couldn’t even be found. Now this didn’t surprise me in and of itself. I’ve met with many wonderful families that took their estate plan documentation home from their attorney’s office, stuck it on a shelf, let it gather dust and never thought of it again. There was no followup from their attorney other than they typical statement that “you should review your plan every 3 to 5 years, so give me a call then and we’ll review it.”

Yet for these great folks (and the others whose plans I’ve reviewed) time marched on. Their life changed, the law changed, their assets changed and the life story they are writing changed. In this particular case, the life story changed A LOT! So much so that they asked me, “our current plan is so far off base now, can we just go ahead and trash it and start over?”

After careful review and discussion of their 20+ year old plan, we did just that. We spent the next several hours designing a plan that was based on their story – their past, their present and their hopes for the future. And with a plan tailored to their specific story, they have added peace of mind.

But we didn’t stop there. They were delighted to hear about the Lichterman Law Difference and how we include ongoing 3 year reviews in all of our planning levels. Yes, that’s right. For no extra charge we followup with them every 3 years to review their plan, their story and how both relate to current law at that time. The key is that we followup with them every three years.

I know how life can be and more importantly, that you have a life! It doesn’t surprise me that few families review their plan every 3 to 5 years. Life is busy and it gets pushed to the side, if it’s even a thought. And yet here I am, an attorney whose passion is estate planning and I’m thinking about it every day. Seems like a no-brainer that I should followup with them. And that way you can enjoy life and continue writing your life story.

The key to the story is this – you have a story you are writing as you live your life, don’t let the story be tarnished by not having an estate plan or, potentially worse, having one that becomes “stale” and fails when it is needed most. Why wouldn’t you give us a call to ensure you have a plan the carries out your story (or revise your plan to help it “catch up”)? Call us at 616-827-7596 today!

Family Stories as a Priceless Treasure

July 31, 2011 / Michael

This post was originally one of my bi-weekly e-newsletters that I send to my clients, friends, family and those who have asked to receive it. It received an unprecedented response from those who read it and I am grateful for the kind words that were shared with me. I thought twice before reproducing it here for 2 reasons: (1) I don’t like to reproduce things – I like to be original each time (or as near to original as I can be), and (2) it brought up all the same emotions it did when I first wrote it. I decided to go ahead and share it because the topic is too important to not share. Please share your comments and thoughts – and if you would like to receive the e-newsletter, let us know via our contact us page. Without further ado, we’ll pick up in the e-newsletter as I get into the topic . . .

. . . Even with all the fun and enjoyment of the July 4th holiday, I did receive some very sad news since the last e-newsletter. My grandpa (“papaw”) passed away after a long bout with cancer. By God’s grace he made it much longer than the doctors expected, but it still wasn’t enough time for us. And in the hustle and bustle of family life and running the law practice, I have one big regret. This is by far the most emotionally challenging e-newsletter I have written, but I’m hoping that you won’t make the same mistake I did. Which leads to this week’s strategy note . . .

Mike Lichterman’s
“Straight Talk” Personal Strategy
Stories of our Forefathers
Sure, given the recent 4th of July holiday the title could refer to stories of Franklin, Jefferson, Adams and many of the founders of our great country. In this case, it is a reference to happy and sad, joy and regret, memories and forgotten memories.

This past Christmas, all of my mom’s family gathered together to celebrate (we try to do that every 3 years). This year was particularly important, as Papaw was not doing so well health wise. He still seemed to have a lot of strength, but you could never be sure with him because he was such a strong man . . . he wouldn’t show pain because he didn’t want folks to worry about him. I still remember a few years back when we visited him in Florida and he said, “well, I hope you didn’t come down here to see some sick guy . . . I’m doing just fine . . . and it’s great to have you all down here.”

Little did I know that this past Christmas was the last time I would see or talk to him. Yes, that was as hard to write as you might expect. I’m so thankful that we had that time and that he got to spend some time with Matthew and Elizabeth (they loved their Papaw and rode on his knee just like I did when I was growing up). But OH the things I would have done different had I known it would be the last time.

You probably know about the priceless conversations that I have with all of my clients. The recorded conversation about any number of topics, from children to legacies, wisdom and values. I call it planning for your Whole Family Wealth, because your values, insights, stories and experiences or your most valuable asset. Here comes the hardest part of the email . . . I never did a priceless conversation with my Papaw and it tears my heart out every time I think about it. He had so many great stories and pearls of wisdom and to have it recorded in his own voice would truly be priceless.

Sure, we talked about doing it at Christmas. Many of us felt we couldn’t do it because we were too close to the conversation emotionally. Papaw felt he couldn’t do it because he didn’t think he had anything valuable to share. Long story short, time moved forward, he went “down hill” quickly, passed away and the conversation was never done. I’m beyond disappointed in myself for not pushing myself harder to do it.

Sure, maybe I’m being to hard on myself and maybe writing this was a way to grieve and move on, but in my mind the point of sharing the story with you is twofold: (1) did you feel the emotion and the power in the story? That’s why they need to be shared, and (2) please, please don’t make the same mistake I did.

I expect all my clients to live long, health, joy-filled lives. But I know that at some point we all will pass from this life. If I’m alive when it happens to my clients I can assure you that the most valuable thing I will be able to provide their loved ones with is not guidance through a difficult situation, it’s not being a sounding board for grief and frustration, no . . . it will be handing them each a copy of the priceless conversation CDs their parents (or sibling or child) recorded as part of the estate plan we helped them put in place.

I know this was long and probably more personal than you would expect in my e-newsletters, but I wanted to make sure I shared the story and what I learned from it. I wish you the very best and I hope you have a fantastic week!

Warmly (and until next time!),
Mike Lichterman

Aging Issues and Estate Plans

July 24, 2011 / Michael

As a Grand Rapids, Michigan estate planning attorney, I take special note of conversations in the media about estate planning. That’s how I ran across this recent Grand Rapids Press article entitled “Aging Issues Can Imperil Retirement.” I believe the overall emphasis of the article is important for two reasons: (1) it points out that everyone needs an estate plan; and (2) trusts are not just for the financially wealthy or for minimizing estate taxes. After a general discussion, the article lists specific, basic guidelines that can help protect seniors and their families from the consequences of declining mental health.

You’ll notice that #1 on the list is to prepare an estate plan. I couldn’t agree more. Why? No, it’s not just because I’m an estate planning attorney. It’s because everyone has an estate – either you can say how you want it handled by working with an estate planning attorney to put an estate plan in place, or you can let the Michigan government’s one-size-fits-all plan control what happen. I think it is important to quickly note the article’s mention of having a living will. As I previously wrote about in this post, living wills are not legal documents in Michigan. So make sure you have a Michigan healthcare power of attorney and patient advocate designation.

You’ll notice that having a living trust is #3 on the list. I’m happy to see that it made the list. Why? Because there are so many misconceptions about trusts . . . the biggest being that you have to be wealthy to need one or benefit from one. I assure you that most of the great families who work with me to create a trust plan for their family are not wealthy by any means. To give you some examples of “everyday people” reasons, read this previous post. I’m also pleased to see that the article discusses the benefits of a trust while you are still alive. There is a big misconception “out there” that trusts are only for when you pass away. Not so – there are huge benefits to having a trust while you are living. I will add that in my experience the fees are not usually the 2-3% stated in the article – in my experience that is a high number.

And finally I think it should be emphasized that these issues are too important to do it yourself. Here in West Michigan we have a very strong work ethic and like to “take the bull by the horns.” I know . . . I’m that way too. That’s why we have so many successful individuals and companies. However, this is not an area where you should do it yourself – there is too much to loose. To get some real world examples you can read my previous posts on the topic by clicking here, here and here.

After reading the article and this post, why wouldn’t you call us to make sure you have a plan that is uniquely you and provides for you and your family during life and after life? Call us at 616-827-7596 and mention this blog post for a special treat.

Business Membership Plans and How It Can Protect Your Business

July 10, 2011 / Michael

As many of my readers and business clients know, I bring a very unique background to being a Michigan Business Attorney. A degree in Finance, Vice President of a commercial equipment leasing company, small business owner and entrepreneur. This background and my own personal view on true client service caused me to step back and look at the way Michigan small businesses worked with their business lawyer.

Guess what? I didn’t like it. The most common model is based on the “billable hour.” I’ve experienced that both as a client (at the leasing company) and as an attorney. Yes, it’s true, I billed by the hour when I first opened my firm . . . it was all I was taught and all I knew. I quickly realized that billing by the hour is a lose – lose situation. When you’re billed by the hour you don’t want to talk with your attorney. Trust me, I know because I didn’t want to when I was a client. And it felt a little bit like giving the attorney a “blank check” because the bill would be for however much time it took. Sure there were estimates, but it wasn’t set in stone. I wanted to have a relationship with my clients, and I knew I couldn’t do that billing by the hour.

Then there was the flat-fee model. A specific dollar amount for a specific transaction. It still felt cold and impersonal. The reason was that it was “just a transaction.” Again, I wanted to have an ongoing relationship with my clients and many of them expressed an interest in something more than the “one off” transaction. Why? Because we’ve seen first hand the incredible value provided by ongoing counsel from a business lawyer (thankfully it was at a time that I wasn’t paying the bill!). Even with a flat fee for the services, once the transaction was over it was a case of “well, if you need anything else, just give me a call.” That was it!

I can tell you from personal experience that the followup call was rarely made. Why? Well, the simplest reason was the owner was busy running the company and it didn’t come to mind. Another common reason was fear of the cost involved for making that call. I knew there had to be a better way. So I thought about what I would have wanted as a business owner who wanted to help ensure the longevity of my business: ongoing guidance, value and a reasonable fee.

The result? The Lichterman Law Business Membership Program. Sounds awfully official doesn’t it? The aim of the business membership program is to provide small business owners and entrepreneurs with the ongoing legal guidance they need and want at a monthly flat rate they can afford. Membership levels range from our base Counsel Plan all the way up to our Pinnacle Plan. Each membership level is designed to provide small business owners with the most commonly needed business legal services. The best part (according to current business members) is the as needed phone and email access included in every plan level . . . and the kicker is that the phone/email access is not limited in any way.

The best part about our Business Membership Program is that it is the result of years of research, talking with dozens of business owners and business advisers about what they need and value most. It’s no surprise that many of those owners have or are current business membership participants. It truly is created for business owners, by business owners.

Despite offering business membership plans for the past few years, you probably haven’t heard much about it. That’s because we are very selective in who we offer business membership plans to so that we can provide the unsurpassed level of client service for which we are known. We’ve had so many business owners tell us to spread the word, that we finally decided to unveil it more publicly (starting with this and future blog posts).

You can get started by reading more about our philosophy by clicking here. Then call at 616-827-7596 to find out if you qualify for a business membership plan. Remember, we take a limited number of monthly membership clients and it is first come, first served, so call quick. We’ll even provide a 2 hour small business needs analysis meeting at no charge if you mention this blog post. Why wait?

What’s Included In Your Estate Tax Estate?

July 3, 2011 / Michael

In last week’s post, we took a look at what an “estate” is here in Michigan. Guess what? That’s not the only “estate” you need to consider when working with a Grand Rapids, MI estate planning attorney (or going through the probate process . . . yuck!). You also need to consider your federal estate tax estate. No, that doesn’t necessarily mean that you will have to pay estate taxes, but you do have to add things up to find out if estate tax is due. To do that, you need to know what is included when adding up those numbers. I guarantee you there will be at least a few surprises.

The easiest way is to think about everything you own . . . everything! Real estate, bank accounts (including some or all of jointly held accounts), retirement accounts, brokerage accounts, automobiles, collectibles, business interests, and life insurance, just to name a few. Did you catch that last one? It is a surprise to many people that life insurance they own is included in determining the size of their estate tax “estate.” I regularly hear, “but I was told life insurance is not taxed!” Well, yes, it is not income taxed and it may not cause any estate tax (depending on the size of your “estate”), but it is included in determining how big your estate tax “estate” is and whether any estate taxes are due. You can read my previous post about how to avoid that by clicking here.

We’re not done yet! Here’s another big surprise to many people . . . your estate tax “estate” even includes some things you gave away! Yes, you read that right. A couple of common examples are gifts made within 3 years of death and property that you gave away but in which you retained an “interest.” The definition of “interest” for these purposes is too in depth for this post, but it is roughly (very roughly) the same as keeping a “benefit” of what you gave away (e.g. the right to say who gets it, the right to receive payments, etc.).

A little bit surprised by all that’s included? Most people are. Here’s the thing about probate (your Michigan estate) and estate taxes (your estate tax estate) . . . they are voluntary! The only people who have deal with them (or whose loved ones have to deal with them) are those who don’t plan to avoid them.

So you can see that we all have an estate and in many cases it is bigger than we thought. Knowing that, why wouldn’t you call us at 616-827-7596 to have your say in how your “estate” is handled? We look forward to planning with you.

What is a Michigan Estate?

June 26, 2011 / Michael

As a Grand Rapids, Michigan estate planning attorney, I field all sorts of calls and conversations about estate planning and probate. I also receive calls and questions about areas of law outside my practice area and I am happy to refer those folks to colleagues I trust explicitly to handle the matter well. I had just such a call this past week. Why, you may ask, would I use that story to start a post about having a Michigan estate? Well, as we were wrapping up the call the nice lady said “I really like you and you can be sure that I will call you for estate planning if I ever have an estate.”

I have news for her and everyone else . . . we ALL have estates. Sure, some are bigger and some are smaller . . . it is not necessarily the vision we may conjure up of rolling green hills with a stately colonial mansion set atop a hill with horses grazing in a field nearby. Although that sounds nice! So that begs the question – what is an “estate” for probate and estate planning purposes?

There are actually two “estates” that matter in this context – (1) your Michigan probate estate, and (2) your federal estate tax estate. In this post I will tackle the first one.

First, make sure you understand what probate is and the context(s) in which you may find yourself (or your loved ones) dealing with it. If you are unsure, you can read my post on it by clicking here.

So, what makes up a probate estate? I would start by considering the value of everything you own. Oh yeah, do not deduct any debt owed on what you own. That’s right – no deduction. Why is that? Because according to Michigan law, the value of assets that must be reported to the probate court is the “fair market value.” Yes, you can list any “encumbrance” (close to “debt,” but technically not the same), but as far as the inventory fee with the probate court, such “encumbrance” will not be deducted.

Ok, so you’ve added everything up. Is it a bigger number than you thought? For most people it is. Now, you will be happy to know that several common ways of owning assets will keep them out of your probate estate. If you have any of the following, it will not be part of your probate estate:

Jointly owned property (bank accounts and marital homes are the most common in this category). Note: this only works as long as there is more than 1 joint owner . . . because if there isn’t, it is no longer jointly owned.
Beneficiary designated assets – IF the person designated is still alive and is at least 18 years old (retirement accounts and life insurance are the most common in this category)
Assets owned by a trust. Note: just having a trust is not enough . . . it must own the property (you can read more about that in my previous posts by clicking here and here)

So there you have it. The basics of a Michigan probate estate. Keep in mind, this is just a basic overview. It is more complex when you “dig down into it,” which is why I recommend meeting with an attorney who really focuses on estate planning so you can fully understand your specific situation.

Stay tuned as next time I will share what makes up your federal estate tax estate. That one is not one you want to miss . . . I guarantee you will discover some BIG surprises in that one. And if you’re ready to make sure that your “estate” is taken care of and that it is done in a way that is unique to who you are, then call us at 616-827-7596 to schedule your Peace of Mind Planning Session.

A Small Business Horror Story

June 19, 2011 / Michael

From time to time I will reference the blog posts of some of my colleagues. In this case, the story was so typical of similar ones I’ve experienced and the post was so well written, I’m reproducing it here with permission. The author is Business Lawyer Gina Bongiovi of the Bongiovi Law Firm in Las Vegas, NV. If you or someone you know owns or plans to start a business in Las Vegas, I strongly recommend contacting Gina. As a Grand Rapids, MI business lawyer I assure you that these same situations crop up here in West Michigan. Enjoy the post and please share your thoughts with a comment.

When I sign a new monthly retainer client, I always conduct what I call a “legal checkup” on the business. I review the company’s formation, licensing, employee or contractor agreements, lease agreements, service agreements, etc. to find ways I can better protect the company and its owners.

Wait, let me clarify. I *request* these documents in order to review them. Often, it takes the owners a while to gather all the information to give me and sometimes they simply ignore my requests, preferring that I instead put out fires. While I’m great at putting out fires, my real value lies in working proactively – modifying these documents to better protect the company before a fire breaks out.

One particular client was in an LLC with another person. We’ll call them Jack and Bill.* Jack requested the initial meeting with me, apparently without telling Bill. Bill walked in during our meeting, demanded to know “who the hell” I was, and threw a fit, yelling at the top of his lungs that “we don’t need no &*%$ attorney!” Following that outburst, I gently asked Jack to send me a copy of the company’s operating agreement. He said it was the one that came with the corporate binder he got when he formed the company and he had no idea where the binder even was. Seeing the writing on the wall, that this partnership was going to crumble sooner rather than later, I made a more urgent request to see the operating agreement. And I requested the operating agreement every few days for the next two months with no response.

A month ago, Jack called to say Bill was leaving the company. I again asked for the operating agreement to make sure Bill’s exit was in compliance with its terms. I also suggested that Bill be removed as a signer on all company bank accounts as soon as humanly possible. No response.

Last week Jack called in a panic. While he was at the bank removing Bill as a signer on the account, Bill was at a different branch, withdrawing $21,000 in cash from the company’s checking account.

Because Bill was still a signer on the account, the bank had no choice but to give him the money.

Because the operating agreement didn’t restrict an LLC member’s ability to take money out of the account, Bill didn’t breach any agreement.

And because Bill pulled the money out in cash, there was no way to stop payment.

Jack’s only option would be to file a lawsuit against Bill, hope that he wins, and then hope that he could collect the money. Of course, a lawsuit would drag on for months and more likely years, tying up company resources in what is probably a losing battle. Plus, even if Bill lost, he could file bankruptcy and then the company would have lost the original $21,000, plus attorney fees, plus time lost while embroiled in a lawsuit.

Lessons learned:

1) make sure your operating agreement is thorough and addresses issues like when a member can take money out of the account,

2) if someone leaves the company, remove them from the bank account IMMEDIATELY. Unless you notify the bank that someone is no longer an owner, the banker has no way of knowing not to give an owner access to company funds.

* Names have been changed to protect the innocent.

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