Michigan Estate Planning: A Checklist
Estate plans are essential for anyone living in the Downriver area. It is especially important for those with children, as guardianship of the children could become a contested issue. With so much at stake, you can’t afford to NOT have an estate plan in Michigan. Use the checklist below to help you plan your estate.
1. Michigan Estate Plan Basics
Your estate plan should be comprehensive, covering what would take place in the event of death or disability. You should consider the financial wellbeing of your family, your property, and how to minimize estate taxes. Also, consult with your attorney so you can avoid probate court as much as possible.
This can be done in a variety of ways. Setting up ownership of property correctly, designating beneficiaries, and executing different estate planning documents are just some of the ways you can ensure your goals are accomplished.
Also, if you have minor or disabled children, then establishing guardianship and medical treatment planning should be established.
2. Insurance Policies Should Be Used To Cover Debts
Auto, homeowners, disability and life insurance policies should be part of your estate plan. You can read more about the role of life insurance in your estate plan here.
Life insurance is crucial if you have minor children or own a home, as it can be used to pay the mortgage, property taxes, and other costs of living. Buying a life insurance policy is also important if you anticipate your estate having to pay large sums in taxes or debt.
The goal here is to ensure your heirs receive the property you want them to receive, without having to use their inheritance to pay off debts.
3. Michigan Estate Plans Should Have A Will
A Will is the most basic of estate planning documents, and should be in place, regardless. Without a Will, the State of Michigan will distribute your assets according to state laws, which may not be in line with your wishes.
A Will ensures that your property will be probated through the court according to YOUR wishes, not the government’s. When making your Will, you need to think about all of your assets, and who should be receiving them. Those that receive property or assets are called beneficiaries.
In addition, you can appoint someone you trust as the representative for your estate. This person is responsible for finding your property, documents and other items and managing them until they are distributed to your heirs.
4. Have a Living (Revocable) Trust in Place
A Will is the bare minimum document. However, a Will does NOT protect your family from having to go through probate court. Probate is usually quite stressful for family members, especially during a time of loss or grief. It can also get expensive, with tens of thousands of dollars in legal fees.
Any property in a Living Trust does not have to pass through probate. Instead, the property will pass directly to the beneficiaries in the trust, saving them time, money, and potential anguish.
In a Living Trust, your property is transferred from you to the Trust, and you become the Trustee. While you are alive and not incapacitated, you retain full ownership rights. This means that you can put your home in your Living Trust, and then sell it if you wish. You can also acquire more assets and add them to the Trust. When you pass on, your Successor Trustee will ensure that your property is transferred to the beneficiaries you designate.
5. Ensure Minor and Disabled Children are Provided For
If you have minor or disabled children, then you can designate a guardian you trust to provide for their care.
Your children will need an adult to handle property or other assets that you leave to them. Be sure the guardian can handle financial matters as well. This person can also be the physical guardian of the children, but this does not have to be the case.
If you do not designate a guardian, then the court will pick someone to raise your children, which may not be who you want (an irresponsible uncle, for example). It is also a common misconception that you must leave all property to your children immediately after your death. You can, and in many cases should, specify that distributions are withheld until your children reach a certain age or milestone. For example, you may wish to wait until your children graduate college before leaving them a substantial amount of money, or wait until they are 25 before they can do anything with the house.
A Living Trust can help with these issues, and more. It is more common these days to see parents with children battling addiction to put “sobriety clauses” in their Living Trusts, so the children don’t lose their inheritance to drug debts or creditors.
6. Make Sure Beneficiary Names In Your Michigan Estate Plan Are Up To Date
Be sure the names of the beneficiaries on your Will, Trust and life insurance policies are up to date. If you are divorced and remarry, for example, be sure that the proper individuals are designated.
Also, with life insurance, it may not be beneficial to name individuals. You may want to have the Trust listed as the beneficiary in this case.
7. Have a Financial Power of Attorney
A financial power of attorney is a way to have someone manage your finances in the event of you becoming disabled or dying.
Basically, this document gives someone the authority to act on your behalf in financial matters. Be careful to make sure this is a “springing” power that only becomes active upon your death or incapacitation.
8. Have a Medical Power of Attorney
Much like a financial power of attorney, a medical power of attorney enables someone you trust to make decisions about your medical care should you be unable to do so.
Be sure to discuss your wishes regarding medical care with the person you designate.
Also consider supplementing your Medical Power of Attorney with a Living Will, which will explain to your representative what your end-of-life wishes are so that they will know what actions to take if you’re unable to communicate.
9. Compile All of Your Digital Assets
Almost everyone has online accounts for matters of banking, email, and investments. You should keep all of the logins and passwords for these documents in a secure place. There are even services such as LastPass for such matters.
More recently, passwords for services such as Facebook, Instagram, and LinkedIn have also cropped up in probate and estate planning matters. Be sure to provide your information for these to someone you trust as well.
10. Leave Instructions For Your Remains
One of the biggest expenses when you die will be your funeral. One way to keep costs low for your loved ones is to plan yours ahead. You can set up a payable-on-death bank account or even pre-pay for your funeral.
Be sure to include your preferences for your Disposition of Remains, whether you wish to be buried or cremated. Also, you may wish to handle matters of organ donation.
11. Keep Your Michigan Estate Plan Paperwork in a Safe Place
Once you have all of your documents completed and in order, then you need to keep these items in a safe place. Also, be sure to inform your designated representative of the location of these documents.
It’s also a good idea to place any deeds, copies of bank statements, credit card statements, and life insurance policies together with your estate documents so that your representative knows where to find your money and assets.
12. Consult a Downriver Estate Planning Attorney
One of the most important things to do when planning your estate is to consult an attorney. Often, people will fill out pre-fabricated online Wills, and later find out that they are not legally valid. This can cost thousands of dollars in legal fees and untold hardship on family and loved ones.
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