Matthew J. Abraham, Esq.
At Abraham | Law we provide practical legal services on a common-sense basis tailored to the specific needs unique to each client.
Understand the importance of your Estate Plan
Many estate planning lawyers act as if everyone should have a trust yet most Americans don't even have a simple will. Another misconception is that trust planning costs thousands of dollars in legal fees. Here are some factors to consider:
How much of your estate can you protect from probate?
One of the main advantages of having a living trust is being able to bypass the time and cost of probate, which is a process of administering an estate that can easily cost thousands of dollars and take several months or even a year or more to resolve. All of which is also subject to public access and scrutiny. Fortunately, not all of your assets are subject to probate. Some exemptions are jointly owned assets with rights of survivorship and assets with designated beneficiaries like life insurance policies, annuities, and retirement accounts. Others can be accounted for and planned to be distributed directly to beneficiaries without the need for probate.
In many states, you can add beneficiaries to avoid probate to bank accounts with a POD or "payable on death" form and to investment accounts with a TOD or "transfer on death" form. Your beneficiaries will just need to present a death certificate and a valid form of ID to get immediate access to the account. Some states will even let you add beneficiaries to vehicles with a transfer on death registration and to real estate with a beneficiary deed. My home state of Michigan lets you take advantage of a “ladybird deed” or enhanced life estate deed to similarly manage real estate. With these methods, you can bypass probate on a lot of your estate, especially if you don't own a home or live in a state that lets you add a beneficiary to the deed. In that case, a trust might not be worth it. Many of these tools are also used in conjunction with a more thorough trust estate to accomplish your goals and wishes.
Will you qualify for simplified probate?
If your probate estate is going to a surviving spouse or domestic partner, or if it is small enough, you may also be able to qualify for a simplified probate process in your state which can be less expensive and require significantly less time.
How expensive is probate in your state?
If much of your estate is subject to the regular probate process, you'll want to get a sense of what that could cost in your state since that can vary considerably. The size of an estate, the number of heirs and/or beneficiaries, the location of assets, and other factors can all contribute to the time and cost of probating an estate. In many situations, a trust can be a lot cheaper in the long run than going through the probate process.
Do you own real estate out of state?
This might be another reason to have a trust. That's because unless you have a beneficiary deed in that state, the property will have to go through that state's probate process with all the costs that entails. In many situations like this, at least entirely separate probate estate procedures must be undertaken. A trust can completely avoid this. Owning property in another country can add another whole layer of complexity.
How comfortable are you with the estate being public?
In addition to the time and cost of probate, another downside is that it's a public process. If you don't want all those intimate details of your financial life and last wishes to be made public, a trust can protect your privacy. For example, you may not want your heirs to know the division of your assets since they may perceive it to be unfair, which can cause conflict or even legal challenges. The probate process also requires all contact information of your beneficiaries and heirs to be filed in the public court record which exposes each of them to the annoyances of marketers and risks of identity thieves.
Do you have a child with special needs?
Of course, trusts aren't just about avoiding probate. Another common reason to have a trust is to provide ongoing financial support for a minor child or a child or other loved one who may never be able to manage the assets themselves. Providing the inheritance to them directly can also disqualify them from receiving some forms of government support. A trust may be able to preserve access to certain benefits they may otherwise become ineligible to receive.
Would you like to do something out of the ordinary?
Trusts are notorious for being used to add "strings from the grave." An example would be providing additional payments to heirs for taking specific actions like going to college or earning a certain amount of income on their own. A trust may allow for a broader range of instructions for you to leave and have followed.
Do you have a taxable estate?
If you're fortunate enough to have a taxable estate over a certain amount, you might want to speak with an estate planning attorney about how various trust strategies can be used to minimize taxes or provide the funds to prevent a business or real estate property from having to be sold to pay the estate taxes. Keep in mind that some states impose their own estate tax on taxable estates. You can get information on the state estate taxes here.
If you decide to draft a trust, be sure to work with a qualified estate planning lawyer. You can ask for referrals from people you know or from the local bar association's lawyer referral service, or you can search for local estate planning attorneys near you. Most lawyers typically offer a free consultation to determine your needs and for you to determine if that attorney is right for you and your family. Interview at least three attorneys and pick the one that's best for you.
If you decide not to draft a trust, you still might have some work to do. Make sure you've taken as many steps as possible to avoid probate in your state like making sure beneficiary designations are up to date and adding as many designations as your state allows. You'll also at least need a will to designate who will inherit your assets and a durable financial power of attorney to empower someone to manage your finances if you're incapacitated. A power of attorney for health care is also highly recommended to complete your estate plan.
Regardless of what estate planning strategy you choose, you'll need to revisit your plan as your needs and the laws change over time. Finally, as easy as it is to put off thinking about things like death and incapacitation, resist the urge to procrastinate. After all, you never know when you'll need your estate plan and by then, it will be too late. It is better to plan your estate the way you want than to have it planned for you.
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 its clients’ estate planning documents so they will accurately and effectively speak to their wishes and goals.