Tag: grand rapids trusts

The Cheap, Online Will – A Real Life Example

May 11, 2010 /

Ok, you just have to read this post from Gregory Luce.  He is in the process of evaluating the differences between an online will and one drafted by an estate planning attorney.  He gives a very fair, well-reasoned analysis of the document and “extras” along with it – the positives and the negatives.  As can be expected, there are flaws in the document.  I encourage you to read the comments at the bottom of the post as they point out many areas of concern.  Some of the items could cause the “effect” of the will to be drastically different than what Mr. Luce intended.

Of course I made sure to add my $.02, which centered on the wholly inadequate guardianship provisions.  I regularly refer to 6 common mistakes that parents make when naming guardians for their children and most, if not all, of them show up in this situation.

Read the post, read the comments, and then let me know what you think.  Sure, it may be less in the short run to do the cheap online will and have the misplaced peace of mind it provides.  But at what cost?  Disinheriting a child?  Having someone challenge it and win?  Having someone taking care of your children who you would never choose . . . or not in the order you would choose?  I look forward to your comments!

Make Your Heirs Rich, Not Your Lawyer

May 7, 2010 /

Say what?  Yes, you read that right.  It is the title of an article I read at the Motley Fool (read it by clicking here).  The main focus of the article is how you want to be remembered after you are gone and how your estate planning (0r lack thereof) can greatly influence your legacy.  They put quite an emphasis on wills, which is interesting because many of the more complex situations the article talks about are far better handled through a trust.  And in some of the examples, a will is almost completely inadequate.  I would also suggest that you review your plan every 3 years, at a minimum, rather than the 5 suggested by the article.  Think back three years and ask yourself how much the law, your life, and what you own has changed.  Those items change on a regular basis – so should your plan.

I’m happy to see them mention estate planning in the context of disability planning.  This is often overlooked . . . sadly, even by some lawyers.  Estate planning is not just “death planning.”   It is more than that . . . it is ensuring that the right decisions are made on your behalf if you are unable to make them yourself due to incapacity or disability.

What do you think about the article and the issues raised by it?  Please feel free to share – I enjoy reading and responding to the comments and emails.

Be Careful Who You Pick As A Trustee

May 4, 2010 /

Although statistics show that the number of people who have an estate plan is not increasing, I do see a larger portion of individuals and couples making the decision to have a trust-based estate plan.  That is, an estate plan where a trust is the main document that controls how things are distributed when they pass away.  One of, if not the, most important decisions you make with a trust-based plan is who will be the trustee and who will be the backup (“successor”) trustees.  The trustee is the person/people/entity that makes sure the terms of the trust are followed.  Depending on the trust’s design, the trustee may have a large amount of discretion on who receives money/property from the trust, how they receive it, and when they receive it.  Yet, in many cases, the decision on who will be the trustees/successor trusties is made hastily, without much thought.

This can be a big mistake!  If you have done your planning correctly and fully “funded” your trust (e.g., transferred assets to it), your trust will have most (if not all) of your assets.  Considering that the trustee will make certain decisions relating to the trust, the choice should not be taken lightly.  The trustee should be someone you trust (no pun intended . . . ok, yes, the pun was intended).  However, don’t stop the inquiry there.  It should also be someone who has sufficient financial management and administrative ability (or is wise enough to hire professionals to handle those tasks for them).  And consider the option of splitting the trustee role  among one or more people/entities.  For example, you could have a “distribution trustee” who determines when to make distributions, and an “administrative trustee” who keeps track of all the accounting, tax, and other detailed financial matters.

I recently had a conversation with a great client.  She shared with me that her father had a trust set up and properly “funded” (I say bravo to him, because not “funding” the trust is the single biggest mistake I see when reviewing estate plans).  He named a local bank as the trustee for distribution and administrative purposes.  He set out several scenarios in his trust about how he wanted to provide for his children (education, businesses, homes, etc.).   One of the main assets in the trust was stock in a certain company.  Long story short, the stock dropped significantly in value and the trustee (the bank) would not sell it.  It believed the stock would come back and that to sell it at the depressed price would violate the bank’s duty as trustee.  This all happened about the time this client was supposed to be getting a distribution to help with education.  She never did get the distribution for education (or much else for that matter).  The good part is that she did a great job on her own and is quite successful today.

I’m not saying you shouldn’t consider a bank or trust company as a trustee, I give the example to show how important it is to fully consider the various options for who the trustee is.  Each situation is different.  That is why you need to make sure your estate planning attorney takes a client-centered relationship approach to your planning . . . not a transactional approach.

What’s So Bad About Probate?

April 25, 2010 /

The short answer – maybe nothing, maybe something. Whether probate is “bad” is a case-by-case scenario specifically based on what is most important to the individual or family who has no estate plan or who has a will-based estate plan.(or worse, a trust-based plan that was never “funded!”).  But Mike, I thought a will bypassed probate.  That is a common misconception.  A will does not bypass probate . . . a will guarantees a probate.  The will must be probated for it to have any effect.

Ok, that was an aside – back to the topic at hand: probate.  Like I was “saying,” your most important goals and objectives will determine whether or not probate is a “bad” thing for your situation.  Here are the most common complaints I hear and which I am routinely asked to help avoid:

Time consuming: probate can be a very lengthy process.  In my experience, the average probate in Michigan lasts a minimum of 6-9 months (except for very small estates).  I rarely, if ever, see the process take less time than that.  I do routinely see it take longer than that.  And the number one thing I’ve seen cause it to drag on longer (sometimes years!) is conflict.  Conflict among any one of several people, whether it be a case of multiple personal representatives (e.g., executors), between a personal representative and a beneficiary or beneficiaries, or someone who “didn’t get what they thought they had coming,” and they want to challenge it.

Costly: probate can be costly.  In my experience, the average cost is somewhere around 3-5% of the probate estate.  That estimate includes everything that could be a cost associated with the probate: probate fee, attorney fees, appraisal costs, bond premiums, CPA fees, filing fees, etc.  For example, let’s say you have a probate estate of $500,000 (not hard to get to if you include real estate, retirement, and other assets).  5% of $500,000 is $25,000.  That’s a decent “chunk of change,” that many people would rather have going to their family.

Public: probate is public.  I’ve had several people request that I “look into” an estate for whatever reason.  Simple enough.  I go to the county courthouse, go to the probate clerk, give them the name of the person who passed away, and they provide me the file (if a probate has been started).  I can look through everything: who the personal representative is, an inventory of the assets, the will (if there is one), what the final distribution (e.g., accounting) was, and more.  Anyone can look at the file.  So, imagine that you have a young child.  You (mom and dad) both pass away and your estate goes through probate.  The estate is put into a conservatorship estate for the benefit of your child and it will be paid outright to your child when he/she turns 18.  The entire thing is public record.  Not only is your child getting the entire amount left of the estate, but there could be less-than-trustworthy people who also know what amount he/she is getting because they’ve been monitoring the probate file.  Whose to say they won’t take advantage of that opportunity.

The good news is that you can plan around all of this by meeting with an attorney who focuses on estate planning – specifically one who does so on a relationship model, not a transactional one.  Someone who will really learn about who you are, not just what you have, so they can work with you to determine what YOUR most important goals and objectives are and create a plan that meets them.

The Game Is On: Billionaire Dies – Stakes Raised On The Estate Tax Issue

April 20, 2010 /

As mentioned in this article over at The Trust Advisor Blog, the stakes are now raised on what Congress will do about the estate tax as a billionaire recently died.  With no estate tax in 2010 (as it stands now), it seems he may have passed his $9 billion (with a “b”) estate to his heirs completely free of estate tax.  If last year’s estate tax rules were still in effect now, the IRS could have collected roughly $4 billion (with a “b”) in estate tax on the estate.

As the article points out, it must be awfully tempting for Congress to reinstate the estate tax in 2010 at its 2009 level and, they say, make it retroactive to the first of the year.  I have to imagine that, given the amount of money at stake now, any attempt at retroactively enacting the estate tax would be challenged tooth and nail by an army of lawyers on Mr. Duncan’s behalf.  It will be very interesting to watch, that’s for sure.  I’ll make sure to keep you updated as I learn more.

A BIG Oops! How Do-It-Yourself Estate Planning Can Disinherit Your Children

April 18, 2010 /

Wondering how that could be possible?  Rania Combs, a Texas Wills and Trusts lawyer, has a great blog post entitled “Do-It-Yourself Estate Planning Mistake Disinherits Child.”  Take the time to read the article – it is a quick read and very well done.  The article is especially poignant, as I have had more cases recently involving children from previous marriages.  Rania’s post is just one of several ways that Do-It-Yourself planning can harm a family and just one of several ways that no planning (or inadequate planning) can hurt a mixed family.

There are only two things I will add to Rania’s excellent post:

  1. Not only does Jack’s new wife have complete control of Jack’s assets and no obligation to use them for Rose’s benefit, but what if the new wife gets remarried?  If she remarries and doesn’t do any planning herself (or does typical planning), there is a very real likelihood that Rose won’t get anything.  I’m not just conjecturing . . . that is based on circumstances I’ve seen.
  2. Not only could Jack have set aside all or a portion of his estate in trust for Rose’s benefit, he could have set the trust up to protect those assets from Rose’s creditors, judgments, estate taxes in her estate, and even her own divorce.

Have you had this happen to you or know someone who has?  I am interested in the story, if so.  Please share via comment on this post or emailing me via our Contact Us page.

And They Say Stuff Like This Never Happens! Why You Should Include Asset Protection in Your Planning

April 11, 2010 /

A recent conversation with a banker friend of mine confirmed the value of advanced estate planning techniques and how they apply in a practical, “real life” sense.

Her story was all to familiar – I hear about these situations on a regular basis.  During life, Husband and Wife had an estate plan drawn up.  At least one part of it was a joint trust with no asset protection  components.  They trusted each other, so they were not worried about the surviving spouse doing anything with the trust assets other than what they initially agreed between them.  When the first of them passes away, the surviving spouse will continue to have the power to revoke or amend the trust in any way.  Fast forward many years – wife has passed away and Husband has a new wife.  That’s where the bankers story gets interesting.  Husband revokes the trust, comes into the bank with new wife, and proceeds to put all the bank assets from the trust into a joint account with his new wife.

Now, do you think that is what his first wife would have wanted?  If they had a typical distribution plan, it would have been set up to continue for the surviving spouse (which it did) and then had it split equally among their children.  Well guess what?  It’s quite possible that the children will get nothing.  What is Husband passes away before his new wife?  His trust is revoked and the bank assets (which are substantial) are in joint accounts with his new wife.  If he dies first without anything changing, his new wife stands to get the vast majority of his assets.  Who knows what else he changed to benefit her . . . beneficiary on life insurance, retirement accounts, annuities, etc.

What could Husband and Wife had done to protect against this?  They could have set their estate plan up in a way that guaranteed that not only a large portion of the assets would have gone to their children (no matter what!), but those assets could have been protected from Husband’s creditors, lawsuits against him, and yes, from a future spouse and even divorce.

Don’t misunderstand me, I am a HUGE proponent of marriage and think Husband and Wife should have trusted each other like they did.  I don’t see this advanced planning as saying you don’t trust your spouse, I see it as making sure that you protect as much as possible of what Husband and Wife worked so hard to create together and ensuring that it continues to benefit their family and not the government or creditors.  And this protection becomes even more important the higher your exposure to creditors is . . . for example, high-risk businesses, doctors, lawyers, and other professionals.

This is something I cover with ALL of my clients.  And no matter who you work with, make sure they understand how this protection can be beneficial and – more importantly – how to do it right!

What do you think?  Please share your thoughts.  I always enjoy comments from my blog readers.