Why You Should Have A Revocable Living Trust

Living trusts are often the topic of small talk at social gatherings or on the golf course, but not many people know what they actually do. They are “living” because they are created now, while you are alive. You sign it and it becomes an enforceable document. Your living trust can be revocable or irrevocable. A revocable trust can be revoked or amended by you. An irrevocable trust cannot be changed by you once it is signed. Because an irrevocable trust cannot be changed, you want to be extra careful to understand its terms. The vast majority of people will start with a revocable trust.

A typical estate plan includes a will that “pours over” your assets to a revocable trust. On your death, any assets in your name alone will become part of your estate. Your will then directs the executor of your estate to hand them over to the trustee of your trust to administer them.  An effective estate plan will, however, look to remove this step to avoid probate altogether and set up your assets to automatically “end up” in your trust.  Your will can then act as a safety net catching any assets you have forgotten to transfer into your trust.

For estate planners, this is where it gets fun. A trust can address many issues, depending on the trust language. Below are nine things you can do with a living trust.

  1. Reduce estate taxes. If you are married, the trust can provide for estate tax savings. Depending upon the state in which you live, a properly drafted and administered trust can save significant amounts in estate taxes on the death of the second spouse.

  2. Protect minor children. A trust can hold the money for minor children until they are responsible enough to manage the money themselves. A trust lets you choose and define the circumstances under which your children receive certain assets form your trust. Many clients prefer to give the children access to the monies staggered over a period of time i.e. at ages 25, 30 and 35.

  3. Save your grown-up kids from themselves. If your child will most likely never be able to manage the money themselves due to a drug or alcohol issue, or because they are just bad with money, the trustee can hold the money in trust for your child’s lifetime and distribute it as needed.

  4. Keep your assets in the family. If your child is getting married and you do not like her fiancé, you should have a trust. In the event they divorce, you do not want half your assets winding up with your ex-son-in-law.

  5. Take the sting out of the fling. If you are concerned that in the event of your untimely death, your grieving spouse will take up with the pool boy, or the cocktail waitress at the country club, putting the assets in trust with a professional trustee will make sure your spouse does not take all the money and give it to his or her latest fling.

  6. Avoid probate. If you put your assets in the trust during your lifetime instead of relying on your will to do that when you die, you can avoid probate. It is not difficult to do – you need to transfer ownership from your regular bank account to a Trust account or name the trust as the beneficiary of your account. – An experienced financial advisors or lawyer can assist you with this and walk you through proper beneficiary designations.

  7. Ensure your family’s privacy. If you have a will that is probated, it will become a matter of public record along with certain other information such as the value of your assets, identification of your beneficiaries and heirs, and often, an inventory listing all of your specific assets. A living trust, on the other hand, is a private document- no probate necessary.

  8. Protect yourself while you are alive. If you fund the trust during your lifetime and later become incapacitated, the successor trustee will be able to manage the trust assets for your benefit. This is important for people who are single, and for those who do not have children. You want a trust in place that will provide for you in the event you are unable to make decisions for yourself.

The reality is that most people can benefit from a living trust. Talk to your lawyer about whether a living trust can indeed help ease your estate planning heartburn.

Abraham | Law:  Experienced and Exceptional Estate Planning Representation

Michigan Estate Planning Attorney Mathew J. Abraham and ABRAHAM | LAW have been providing effective legal representation to individuals and businesses for over Twenty-Five years.  If you have questions about estate planning or probate issues, you should call ABRAHAM LAW at 810-750-0440 or reach out through our online request to schedule an initial consultation.

As a Michigan estate planning attorney, Matthew Abraham engages in close and careful consultation with his clients so that he prepares documents that are custom fit for each client’s particular situation. Abraham Law prepares estate planning documents so they will accurately and effectively speak to the unique wishes and goals of each client.

Michigan Estate Planning Lawyer Debunks Estate Planning Myths [Part 2]

Estate planning is the process of arranging, during a person's life, for the management and distribution of that person's estate during the person's life and at and after death, while minimizing any tax consequences. Not all estate plans are created equal and should be specific to each person, couple, or family and tailored to their unique needs. Estate planning is one of the most important steps any person can take to make sure that their final property and health care wishes are honored and that loved ones are provided for in their absence. This should include financial planning and guardian designations for any minor children as well.

Unfortunately, many people postpone even rudimentary estate planning decisions because of common misconceptions based on prevalent estate planning myths.  As an experienced Michigan estate planning lawyer, Mathew Abraham often receives calls from people after they have already experienced the consequences of inadequate estate planning that results in frustrated intentions, unnecessary probate, personal family turmoil, or tax expenses and loss of control of health care decisions.  This article is intended to dispel some common myths about estate planning to help promote better planning and decision-making.

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Michigan Estate Planning Lawyer Debunks Estate Planning Myths [Part 1]

While estate planning objectives and the best options for achieving those goals can vary dramatically, all adults can benefit from at least a simple estate plan.  A range of factors might dictate an individual’s specific estate planning needs, such as a simple will, living trust, financial power of attorney, advance health care directive and more.  Unfortunately, many people postpone even rudimentary estate planning decisions because of common misconceptions based on prevalent estate planning myths.  As an experienced Michigan estate planning lawyer, Mathew Abraham often receives calls from people after they have already experienced the consequences of inadequate estate planning that results in frustrated intentions, unnecessary probate, personal family turmoil, or tax expenses and loss of control of health care decisions.  This article is intended to dispel some common myths about estate planning to help promote better planning and decision-making.

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What is a Revocable Trust?

And why should I have one!

Whether you have accumulated a sizable estate or not, all of us should be considering those estate-planning tools that will allow our assets to seamlessly and efficiently (and privately) transfer to your heirs.  A revocable trust may be just the solution to consider.

Understanding Revocable Trusts
The greatest benefit of a revocable trust is that it allows for the independent administration of the estate and greatly simplifies the estate-planning process. When a person without a trust passes away, their property and assets must then be disposed of under supervision if not direct control of the local probate court judge. Not only can this be an inefficient time-consuming and potentially costly process, it also requires a public record to be created of the property being passed to heirs.  In today’s age of identity theft and asset protection, this is not always the most desirable route for an estate plan to take. And it shouldn’t have to be-- setting up the right estate plan can actually be quite simple.

By using a revocable trust for example, you can greatly avoid this costly public process and turn it into an intentionally simple and efficient plan.  The property you transfer to a revocable trust is no longer considered a part of your probate estate. It will pass to your heirs in the manner that you choose to lay out in the governing trust documents and it will do so without the need of a probate court's intervention—no judge; no probate court intervention; and no public record! This avoids the creation of a publicly available document which would otherwise require all of your estate assets to be outlined and how they are to be disposed of and to whom they are going to be received.

Another attractive quality of revocable living trusts is the ease with which they can be set up. Meeting with an estate planning attorney to discuss the specific instructions you want to give the trust and designating the right people to carry them out is quite simple and relatively quick.  The crucial action step and most important thing to keep in mind is that one you set up the trust, you need to formally transfer those assets you want the trust to administer into the trust and designate who your beneficiaries are.  In the case of revocable trusts, the initial trustees and its beneficiaries are all generally the grantor or grantors (typically the husband and wife) until he or she passes away, at which point a successor trustee distributes the trust's assets, first for the benefit of the surviving grantor(s), and then to the grantor’s residual beneficiaries.

The simple thing to understand is this:  If you're looking for a solid legal device that will assist your estate-planning process to ensure what you want to happen will, in fact, happen, then a revocable trust may be the way to go. This is particularly true if you want the flexibility that allows you to revoke the trust and/or move assets in and out of the trust.

 

Abraham | Law:  Experienced and Exceptional Estate Planning Representation

Michigan Estate Planning Attorney Mathew J. Abraham and ABRAHAM | LAW have been providing effective legal representation to individuals and businesses for over twenty years.  If you have questions about estate planning or probate issues, you should call ABRAHAM | LAW at 810-750-0440 or submit an online request to schedule an initial consultation.

 

What the heck is a "Lady Bird Deed" (aka: Enhanced Life Estate Deed or Transfer on Death Deed)

Also known as a "Transfer on Death Deed" it is a reference used to describe an Enhanced Life Estate Deed. The term came into use when former President Lyndon B. Johnson used an enhanced life estate deed to transfer some property to his wife, "Lady Bird Johnson." An enhanced life estate deed can be used like a Warranty Deed or a Quit Claim Deed but with added benefits to the transferor.

Estate Planning to Manage & Protect Your Assets

Estate Planning to Manage & Protect Your Assets

What is an Enhanced Life Estate Deed?

It is a document that is primarily used to avoid the probate of real estate. It can also be used to transfer other assets like tangible personal property such as athletic equipment, furniture, home decorations, etc. Other valuable aspects of a transfer on death deed is that a person can reserve a life estate for themselves in the property coupled with the authority to sell the property or commit waste at anytime without permission of the named default beneficiaries.

If the person creating the deed does not sell the property during his or her lifetime, the home will pass directly to the named beneficiaries after the death of the grantor(s). The real estate avoids going through probate just like any other deed that conveys ownership of real estate to another person without the danger of triggering adverse consequences.

An added value of using an enhanced life estate deed is that the execution of such a deed is not considered a transfer of ownership for purposes of applying for Medicaid benefits. In February of 2006, the government passed the Deficit Reduction Act that changed many of the rules Medicaid uses for determining when a patient/applicant can begin receiving benefits for services such as nursing home care.

Under the current law, the state will "look back" five (5) years from the time a patient applies for Medicaid benefits. Prior to February 2006, the look back period was three (3) years and was from the time that a patient disposed of valuable property gratis or at a much reduced sale.

Therefore, if a patient transferred his or her home to children to avoid probate and remove the home from countable assets, the government will look back five years to see if the transfer took place in that time frame. If it did, then the patient will have to wait a penalty period before he or she is eligible to receive benefits. This penalty period can be devastating if the patient does not have any other assets to carry them through the penalty period.

Another desirable feature of the lady bird deed is that the property will not be subject to the creditors of the named beneficiaries. If a beneficiary has government tax liens, judgments against them or other encumbrances, their problems do not become attached to the grantor's real estate. In addition, if it appears the liens will still be present after the death of the grantor, the grantor, during life, can remove the troubled beneficiary from the deed and substitute another beneficiary to take the property at the grantor's death.

When a lady bird deed is used in the manner of a warranty deed, the grantor is giving the beneficiary a warranty that A) the grantor has clear lawful title to the property, B) the grantor has the right to convey the property, C) the grantor assures the quiet possession of the property (meaning there is no dispute over ownership) D) the property is free of any leins or encumbrances not of record E) grantor will defend the title to the property against any lawful claim.

Compare this to a quit claim deed that does not provide any of the above warranties. All a quit claim deed can do is allow a grantor to give up any right he or she may have in the subject real estate. Further, a quit claim deed gives a present ownership interest in the grantor's property and this can cause problems later if the grantor needs to sell his or her home and the joint owner refuses to sell.

This is why it is highly recommended that people do not use quit claim deeds to transfer real estate to other persons to avoid probate. This is not the case if a quit claim deed is used to transfer property to a revocable living trust. However, even transfer to a revocable trust may not be desirable due to the fact that creditors may be able to reach real estate in a revocable trust.

It is important to remember that real estate owned by a husband and wife is held as "tenants in the entirety." This form of property ownership is immune to collection by creditors if one of the spouses is not a party to a loan or debt incurred by the other spouse alone. If the real estate is transferred to the trust by a quit claim deed, this could destroy the ownership of the property as tenants in the entirety and open it up to collection efforts by creditors.

Use of a Lady Bird Deed allows the tenancy in the entirety to continue and execution of the deed does not transfer the real estate. The real property is transferred upon the death of the survivor if the property is not sold or transferred by the grantor(s) during life. In addition, because the beneficiaries do not take ownership of the property until the death of the grantor(s), it is not considered a gift for federal gift tax purposes. Also, the beneficiaries take the property at a stepped up cost basis when they take ownership at the grantor(s) death. This benefits the beneficiaries by greatly reducing or eliminating any capital gains tax that must be paid on the income produced by the sale of the home.

Property taxes are also held in check by use of a Lady Bird Deed. In most other cases, if a property is transferred to another person by warranty deed or quit claim deed, it "uncaps" the property taxes on the real estate. The law requires a filing of a Property Transfer Affidavit with the township assessor's office when property is transferred and this allows the local government to reassess the property and increase the taxes based on the property's current value.

A Lady Bird Deed does not transfer the property at execution of the deed rather, it creates a power of appointment in the grantor(s) and provides for a gift in default to the default beneficiaries named in the deed. It is the death of the grantor(s) and not the creation of the Lady Bird Deed, that signals the transfer of property to the named beneficiaries.

Once the property is transferred to the beneficiaries by the death of the grantor(s), only then must a Property Transfer Affidavit be filed within 45 days after the grantor(s) death with the local tax assessor's office. At this time the beneficiaries should obtain a current appraisal and determine what their stepped up cost basis is in the property. The beneficiaries can now sell the home and minimize or eliminate capital gains tax.

In conclusion, an Enhanced Life Estate Deed (Lady Bird Deed) can be a very useful tool in estate planning in certain circumstances. If a particular person's situation does not require the complexity of a trust or even a will, then a lady bird deed could be used to transfer a home to a beneficiary while at the same time maintaining ownership of the property should it later be required for the grantor's financial needs. The lady bird deed eliminates the fear a person may have in giving up ownership and control over their own property just to avoid "the government getting it."


Disclaimer: The information contained herein is not comprehensive and should not be construed as legal advice. Further, reliance on any information contained in this website does not constitute the formation of an attorney/client relationship. The law discussed herein is complex and constantly changing. You should seek the assistance of an experienced attorney for specific legal advice regarding your particular circumstances.


Abraham | Law:  Experienced and Exceptional Estate Planning & Real Estate Representation

Estate planning & Real Estate Management are essential for the protection of your loved ones, your hard earned assets, and your legacy.  Having an experienced Michigan Estate Planning Attorney to protect your interests is important.  Matthew Abraham of Abraham | Law will assist you through the intricate process of thoroughly preparing a complete estate plan tailored to meet your specific needs and wishes as well as managing your real estate holdings.  With the myriad of estate planning tools available to you, you need a law firm that will guide you in the best direction for your family.  

For assistance with all of your estate planning needs, call Abraham | Law today at (810) 750-0440 to schedule your free consultation.  

Launching a Startup? Drive Success with the Right Mindset

If you want to make your startup a success, the first thing you need to do is get into the right mindset. This might be your first venture, or you may be a veteran at launching new businesses—it doesn’t matter.

The fact is this: It’s easy to become the biggest obstacle to your own success. Your thoughts and your emotions can hold you back and get the better of you. If you don’t go into the office every single day in the right frame of mind, you’re going to end up making bad decisions.

You need to focus on what really matters if you want your startup to grow fast and succeed. Here’s what you need to focus on if you want your mindset to be a strength rather than a weakness.

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Estate Plans & the New Tax Law- What must I do?

Time to update: Make sure your estate plan documents fully support your interests and those of your heirs.

An estate plan is like a car or a house: It needs regular maintenance to function as intended. Yet unlike your car or home, external events can create the need for adjustments. Among such events is legislation like the tax bill Congress passed in late December.

So this is an important time to schedule a meeting with your estate planner and be certain your plan is up-to-date. Even if your estate plan won’t be affected by the new tax law, it’s smart to confer with your estate planner periodically to be certain your current wishes are reflected in your estate planning documents.

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The Value of Setting up a Trust for Your Children

The Value of Setting up a Trust for Your Children

The thought of your minor children growing up without you is enough to bring a lump to any parent’s throat. You plan to be with your children to see them grow and enjoy life, but what if something happens to both you and your spouse? You have hopefully planned to leave money for your children through life insurance. What about who would become their legal guardian? If you have significant life insurance and/or assets, your minor children could become wealthy overnight. How would they handle that responsibly?

The answer is that they would need help.

You can take one critical step now to empower yourself to have a say in how your children are raised, no matter what. By creating a will with a trust component, you will be able to choose who acts as a caretaker for your children, who handles their finances and how the assets should be distributed to reflect your wishes.

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Bankruptcy Basics

Bankruptcy Basics

For many individuals, filing for bankruptcy relief can provide a way out of debt and a fresh financial start. But whether or not a bankruptcy filing is in your best interest depends on many factors and your individual circumstances. Read on to learn more about what to consider if you are thinking about filing for Chapter 7 or Chapter 13 bankruptcy.

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Estate Planning

Estate Planning

Whether you are married or single; whether you have adult or minor children or no children, having a comprehensive and well thought-out estate plan is the smart thing to do and is always in yours and your families' best interests. Most commonly, the minimum basic estate plan should include a will and/or a trust, durable power of attorney and patient advocate designation (health care power of attorney).  The power of attorney and patient advocate designation can usually avoid the need for appointment of an adult guardian or conservator in the event of your incapacity.

An estate plan is particularly important in cases of a blended family with children from a prior marriage or relationship and may be drafted in conjunction with a Pre-Nuptial Agreement so as to avoid unintentionally disinheriting your children or other loved ones.  Careful attention must also be paid to situations involving children or loved ones with special needs who may be entitled to receive Social Security Disability benefits, as well as seniors for Medicare and Medicaid eligibility planning along with military veterans who are entitled to VA Benefits.  Careful planning is needed to avoid disruption of those benefits.

Whatever your unique situation presents, creating a comprehensive estate plan will provide you and your loved ones peace of mind that your affairs are in order.

Abraham | Law:  Experienced and Exceptional Estate Planning Representation

Michigan Estate Planning Attorney Mathew J. Abraham and ABRAHAM | LAW have been providing effective legal representation to individuals and businesses for over twenty years.  If you have questions about estate planning or probate issues, you should call ABRAHAM | LAW at 810-750-0440 or submit an online request to schedule an initial consultation.

What Happens If a Person Dies with No Will or Trust in Michigan?

By:  Matthew J. Abraham, Esq., Michigan Estate Planning Attorney

When families lose a loved one, the emotional stress and grief can make it difficult to focus on financial issues.  Unfortunately, surviving family members might need access to assets of a breadwinner’s estate to provide for their basic financial needs like the home mortgage, school tuition, utility bills and even basics like groceries.  When the assets of an estate are tied up in probate, the value of the estate can be diminished substantially, and access to money can be delayed for months or even years if the estate is subject to a contested probate proceeding.  These are just a few reasons that most people try to avoid the probate process.  While the probate of a will can raise significant issues, such as probate costs, delays in distributing residual assets and privacy violations, the situation can be far more problematic when an individual dies with no will or trust at all. 

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Michigan Business Entities- The Limited Liability Company (LLC)

Michigan Business Entities- The Limited Liability Company (LLC)

April 29, 2015 in business, LLCs, Limited Liability Company

BUILD YOUR BUSINESS ON A SOLID FOUNDATION

Many startup companies, entrepreneurs, self-employed businesses, and developing organizations are choosing to organize and form LLCs as opposed to traditional corporations because the LLC is typically cheaper to form, less expensive to maintain and operate, has more options with four choices of federal income taxation, and has fewer annual filing and recording formalities than corporations.  It is important that you build a solid foundation upon which to launch your business endeavor.  Take the right steps by consulting with an experienced business attorney to make sure you are building a solid foundation upon which to launch or expand your vision.

Contact Abraham | Law to get your business off the ground the right way by setting up your Michigan LLC today.

Is an LLC right for you? 

If you have questions about starting a Limited Liability Company, you should contact LLC and corporate business attorney  Matthew Abraham or call 810.750.0440 and determine the best business strategy for you.

 

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Is a Limited Liability Company (LLC) right for you?

So What Type of Business Entity Do I Need?

This is the first question to ask and answer when preparing to engage in or launch a new business venture and even when forming an entity for an established business.  While there are many benefits of forming a limited liability company (LLC), it is important to understand why you should consider forming an LLC over other available types of entities for your business.

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Basics of Estate Planning: Protecting Your Legacy and Your Loved Ones

 

Michigan Estate Planning Attorney

Protecting Your Legacy and Your Loved Ones 

Estate planning is an important process designed to ensure your loved ones are cared for after your death and your final wishes are carried out.  Many people loathe discussing the topic of estate planning, but the reality is that estate planning encompasses more than just death and taxes.  Estate planning allows you to leave a legacy for your heirs, which for many is ultimately the most important thing in life. 

Despite the common recognition as to the import of estate planning, nearly half of all Americans today do NOT have an estate plan

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