Category: Trusts

Did Steve Jobs Have an Estate Plan?

October 16, 2011 /

As someone who uses and iPhone® and an iPad® in my law practice and in my personal life, I’m grateful to Steve Jobs for his foresight, innovation, and refusal to let earlier failures and setbacks stop him from doing what he loved.  I am saddened by his recent passing and hope to see another innovator of his type sometime in my lifetime.

As a Michigan estate planning attorney, I take a keen interest in the estate planning people have done (or not done) . . . and celebrities are no exception.  Many times the stories of celebrity estate planning mistakes or triumphs are a way to help families better understand the importance of estate planning.

So, did Steve Jobs have an estate plan?  As the famous “eight ball” would say – signs point to yes.  According to a Forbes.com article there is some evidence that Mr. Jobs had some level of a trust-based estate plan.  As the article points out, if that is the case, we may never know the extent of his planning.  Why?  Because trusts, when used properly, are completely private – unlike wills that must be filed with the probate court.  This is a benefit of a trust-based estate plan that is often overlooked.

With the caring, family man that he was, it wouldn’t surprise me if he did have a comprehensive plan meant to protect his and his family’s privacy.  What an incredible gift to them.  Avoiding what I call the “double tragedy” – the passing of someone they loved and a mess of an estate plan (or no estate plan) on top of it.

Don’t be fooled into thinking that Mr. Jobs’ enormous wealth was the reason he had an estate plan.  The article points out several celebrities with ‘gobs’ of money who did not have an estate plan (or had an estate plan that was horribly inadequate for their financial and family situation).

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.

A Creative Idea for “Supercharging” Your IRA – Part 2

June 12, 2011 /

Ok, so you read my previous post about the incredible legacy you can create by “Supercharging” your IRA.  The logical questions are: what are the drawbacks to the “traditional” approach to IRA beneficiary planning and how do I do the “supercharged” strategy?  Well, I’m glad you asked.  That is what this post is about.

So, how is IRA beneficiary planning typically done and what are the drawbacks?  Usually, a married couple will name each other as the beneficiary of their IRAs.  This is done for many reasons, two of the most common being love and the additional “rollover” options provided to a surviving spouse by the tax code.  Yet, there is a problem . . . spouses are usually near the same age.  That means when the first spouse dies, the “stretch” tax deferral period of the deceased’s spouse’s IRA will typically be rather short.  This goes against the goal of many IRA holders’ desire to maximize the “stretch” period to take full advantage of the tax-deferred growth of their IRA after their passing.

One option is to name a person from a younger generation as the beneficiary of the IRA.  There’s a problem with that too . . . the surviving spouse is left out of enjoying the “fruits of labor” from the IRA.  The “Supercharged IRA” strategy mentioned above is the way to have your cake and eat it too.

In this strategy, a younger person is named as the beneficiary of the IRA.  Or better yet, an IRA Legacy Trust for the benefit of younger people is named so that you can not only maximize the “stretch” tax-deferral period but also make sure the IRA proceeds are asset protected for future generations (from creditors, predators, divorce and poor spending habits).  As mentioned in my previous post, the required minimum distributions from the IRA are used to purchase a permanent life insurance policy on the life of the IRA holder with the spouse named as the primary beneficiary (or better yet, an Irrevocable Life Insurance Trust purchases and holds the policy so that it is asset protected from the insured’s creditors, predators and potential divorce).

What is accomplished?  The IRA tax-deferral stretch is much greater because a younger person is beneficiary and the surviving spouse doesn’t miss the IRA benefits because he or she receives the insurance proceeds, which can be much greater than the IRA due to leveraging the life insurance premium.  An additional benefit of this strategy is that it can be used for non-traditional couples and single individuals.

Make sure to discuss this strategy with a financial adviser, life insurance agent and estate planning attorney who are familiar with it and accustom to the mechanics of implementing it in your situation.

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.

A Creative Idea for “Supercharging” Your IRA – Part 1

June 5, 2011 /

As a Grand Rapids, MI estate planning attorney, I regularly help individuals and families plan for how to transfer their IRA accounts according to the legacy they want to leave.  One scenario that provides an incredible opportunity is when you don’t need the required minimum distributions (RMDs) for living expenses.  If you don’t need your traditional IRA funds to live on during retirement, you may be focused on building up this nest egg for your children or other loved ones and be tempted to avoid taking any withdrawals from it. After all, the larger your IRA is, the larger your children’s inheritance will be, right?

Unfortunately, this isn’t necessarily the case. After age 70½  you must take RMDs annually. If you don’t, you’ll owe a 50% penalty on the amount you should have taken but didn’t — in addition to any ordinary income tax you owe. So, for example, if your RMD was $12,000 for a given calendar year, you would owe a $6,000 penalty. That’s $6,000 that would go to “Uncle Sam” rather than to a loved one or charity.

A much better option can be to take the RMD, pay the ordinary income tax on it and use the remaining amount to pay the premium on a life insurance policy.  This strategy can “supercharge” your retirement plan by providing a way to maximize the “stretch out” of RMD payments after your death, lengthening the tax deferral period. The longer the RMDs are “stretched out,” the longer the IRA assets can grow tax deferred.  Then you can use the RMD payments to leverage the benefits of life insurance to greatly increase the ultimate amount received by your loved ones, charities or others.

Curious how it works and how you can use it?  Stay tuned . . . I will cover that in a future blog post.

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.

The Biggest Misconception About Trusts

April 24, 2011 /

Last week I wrote a post about the biggest misconception about wills.  The same recent conversation that I mentioned in that post also reminded me of what I believe is THE biggest misconception about Trusts.  Remember what my friend said?  “So I have my will or trust, so I don’t have to worry about going through probate…”

The Myth: having a trust means that you don’t go through probate.  And the buzzer says “bzzzzt,” wrong.  You may be thinking, “what?!  Mike, you are off your rocker.  That’s why I have a trust . . . to avoid probate!”  Just *having* a trust does not bypass the probate process.  To bypass probate, the trust must be “fully funded.”  “Funding” a trust is the process of changing ownership or beneficiaries of an asset to the trust.  I still have not had a trust come through my office for a review that was fully funded.  Yes, you read that right.  I know they’re out there, but I have yet to have one come in for review!  Not exactly what you thought when you started creating your legacy, huh?  If you’re curious to know more, you can read my blog post on the topic by clicking here.

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.

An Issue With Typical Michigan Estate Plans in 2010

October 3, 2010 /

The current environment with no estate tax seems to be causing a bunch of unintended consequences (as if that’s a surprise!). Here’s another…

A standard, tax-driven Michigan estate plan for a married couple, put together by many advisers, uses what are called “A-B” trusts. Upon the death of the first spouse, the single trust may split into the decedent’s trust and the survivor’s trust (sometimes called the family trust and the marital trust). The amount in the decedent’s trust is usually equal to the federal estate tax exemption. The remaining assets go to the survivor’s trust for the surviving spouse’s benefit.

The problem with this setup in 2010 is that a deceased spouse may unintentionally give the surviving spouse nowhere near the benefit they intended. . . or even nothing! With no federal estate tax, all assets pass to the decedent’s trust under the typical language, leaving nothing for the survivor’s trust. The decedent’s trust most likely benefits the surviving spouse, but probably has many more restrictions than the survivor’s trust. For example, the surviving spouse may only be an income beneficiary with the remainder going to the children.

Although 2010 is drawing to a close soon, this issue emphasizes the importance of scheduling a review of your current plan or the plan of your family and friends, because even though the estate tax is sure to change, there are so many other aspects of your plan which are affected by this constantly changing legal and economic environment. If there’s ever been a time to work with an attorney that has a membership/maintenance plan it is NOW – that way you don’t get stuck with a bill every time Congress changes the law in a way that may harm your planning.  Don’t be caught by surprise!

And don’t even get me started on the fact that Congress still hasn’t made its mind up on what will happen next year (let alone this year).  We could well see the exemption go down to $1 million dollars.  I know what you’re saying . . . Mike that is a LOT of money.  You’re right, it IS a lot of money.  Think about this though – that amount includes everything you own including the value of life insurance…yes, life insurance.  That puts a lot of people in a position that requires considering tax planning.

If you, your family or your friends need to review your plan or make sure that you have a plan in place in these turbulent times (rather than the State’s plan for you), contact us at 616-827-7596 and mention this post for a special discount.

Michael Lichterman is an estate 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 planning for  the “experienced” generation, the “sandwich generation” (caring for parents and children), doctors/physicians, nurses, lawyers, dentists, professionals with minor children, and family owned business succession – and he is privileged to do so from a Christian perspective.  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.

The Importance of Michigan Trust Funding

September 22, 2010 /

More and more Michigan residents have an estate plan that is “trust-based.”  This means that the key distribution document within their plan is a trust.  You can find out more about trusts by clicking here to read my post “what is a trust?” And yet many of these estate plans will fail to do everything you intended them to do.  Why?  Well, that’s the point of this post!

The key thing to remember with a trust is that it only accomplishes all its advantages if it is fully “funded.”  What do I mean by “funded?”  That means that everything you own is somehow titled (owned) in the name of the trust.  It could be by actually naming the trust as owner, making the trust a beneficiary of an account, or some other method.  The point is, a trust is like a car – your estate planning attorney should have taken you through a comprehensive process of picking the “options” you want (like a window sticker).  And yet your trust won’t accomplish all you wanted if it’s not properly funded, much like that new car won’t go anywhere without gas.

Many Michigan estate plans fail to accomplish everything you wanted because the trust is not properly funded.  And here’s the kicker – the traditional approach to estate planning is partly to blame!  That’s right, I’m putting part of the blame on how estate planning is done.  Here’s how I was initial taught: you meet with an attorney who seems to know what they’re talking about (and hopefully focuses in estate planning), but you may not want to ask many questions because you figure the attorney will just take care of it and it will be fine.  You’ll come back in a few weeks and sign some documents, again probably not asking many questions.  Then you’ll take your fancy planning binder home, put it on the shelf and mark “estate planning” off your life checklist.

If you’ve done estate planning, does that sound familiar?  Probably.  And yet your trust is likely sitting there with just $10 or your personal property in it.  Your attorney probably told you that the trust needed to be “funded” and gave you a written list of instructions on how to do it.  But you read them and found them difficult to follow and it wasn’t really emphasized that your plan could very likely fail to accomplish all you want if the trust wasn’t funded, so you don’t do it.

So what happens?  Your life, the law, and what you have changes over the years and yet your plan sits there with an unfunded trust that hasn’t kept up with any of those changes.  Then something happens and your family is stuck dealing with a plan that is outdated and may accomplish very little of what you wanted.

To me this is a HUGE problem and needed to be changed.  Well, much like the story of the little boy who was throwing little fish back in the ocean, knowing that he made a difference to “that one,” I set out to make a difference for my clients.  How?  Follow-up.  Not only do I make sure that questions are asked and answered and put a very strong emphasis on the importance of funding their trust, I take some extra steps.

I provide an asset spreadsheet listing all that you own so you can go to one sheet instead of looking through a pile of paperwork.  An added bonus is this helps with financial organization too!  I regularly check in with my clients to find out the progress they’ve made or give them a gentle nudge if the trust funding isn’t moving along.  I’ve gone as far as to call a client every month for well over a year!   Why, because it is too important to fund your trust. Sure, it may have been a little annoying, but it got them moving on funding their trust, which is the most important part.  I know that my clients trust me and have spent their hard-earned money for me to help design and implement their estate plan.  I would be letting them down if I did anything less!  And finally, I take care of all of the funding for some of my clients (for an additional fee).  This gives them the peace of mind of knowing that it’s done and done correctly.

So, what about you?  Do you have an trust-based estate plan?  Is the trust funded?  Are you SURE it’s funded and funded correctly?  If not, it’s time to do something about that!

If you want a client-centered, personal service-based approach, give us a call.  

Michael Lichterman is an estate 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 planning for  the “experienced” generation, the “sandwich generation” (caring for parents and children), doctors/physicians, nurses, lawyers, dentists, professionals with minor children, and family owned business succession – and he is privileged to do so from a Christian perspective.  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.