Estate Planning

Sunday, September 20, 2015

Four Reasons an Estate Can End Up in Litigation

Why does an estate end up in litigation and how can it be avoided?  

Preparing an estate plan is a vital legal milestone that can ultimately protect your assets from being whittled away in legal fees and court costs. Believe it or not, estate litigation cases are among the most common cases to appear in Michigan courtrooms. There were actually several thousand contested probate matters presented to the Michigan courts in 2013. The following are the top four reasons an estate can end up entangled in a lawsuit:

#4: Disinheritance:

Disinheriting a child is a dicey subject, but certainly understandable in certain circumstances. Many parents, for instance,  disinherit a child for whom they have adequately provided during their lifetime in order to leave a portion of their estate to charitable causes, preparing their children for this eventuality beforehand. In other cases, however, the disinheritance comes as a complete shock to the would-be heirs and may result in a lawsuit alleging undue influence or error in judgment.

To avoid the latter result, disinheritances must be spelled out in clear, concise, unambiguous language, without any possibility of being misconstrued. If this is done, even if the disinherited relative files suit anyway, the suit is unlikely to go far.

#3: Constant Amendments:

An estate plan can certainly be amended to reflect changes in the family dynamic. It should not, however, be updated every few months, since this may give surviving family members a cause to doubt competency. If you are considering changes to an existing estate plan, carefully consider the options and only make amendments that you are certain will be permanent.

#2: Perceived Undue Influence:

Undue influence is one of the most common claims in estate litigation, and it basically asserts that the deceased was improperly coerced to make estate plan changes in favor of a certain beneficiary. Oftentimes, the target of the undue influence claim is a child or relative who spent the most time with the deceased and/or offered regular assistance with daily tasks. If you would like to leave the bulk of your estate to a certain close relative, a competent attorney can ensure the bequests are properly drafted and there are no questions of mental competence at the time of execution.

#1: No Estate Plan at All:

Failure to make an estate plan can result in catastrophic family conflicts – particularly for non-immediate family members who were promised assets or heirlooms by the deceased during his or her lifetime. To avoid such unintended dissension, contact Andrew Byers, Attorney and Counselor at Law for skilled, knowledgeable assistance. Serving Detroit and surrounding regions of Michigan, we can be reached at: 248-301-1511 today. 

Monday, August 31, 2015

How to Properly Fund a Revocable Trust to Make it Useful

After I have signed my trust, what are the next steps?

Executing a revocable living trust is an excellent way to streamline an estate plan, avoid probate, and provide for loved ones. However, without proper trust funding, the document is essentially useless and will serve no purpose to either the grantors or their beneficiaries. Accordingly, it is essential to engage in the proper follow-up steps after executing the trust, which can be facilitated with the help of a knowledgeable Michigan estate planning attorney.

Real property

One of the most important aspects of trust funding is issuing a deed-to-trust from the current owner(s) to the name of the trust. In most cases, this is a simple procedure that involves drafting a new deed conveying the property from the grantor(s) into the name of the trust. The deed is then recorded and the “owner” of the property becomes the trust instead of the individual. This way, when it is time for the property to pass to the named beneficiaries, the transfer will occur based on the directives of the trust, and formal probate proceedings will not be necessary.

As a word of caution, however, grantors with an outstanding mortgage on a property should contact their lender before transferring ownership to trust. While it is often not a problem, lenders have been known to trigger the acceleration clause in the mortgage, citing an unauthorized change in ownership.

Titled personal property

Vehicles, boats, firearms, and other property with a title or ownership document should be transferred into the name of the trust as well. Depending on the item, this generally requires a trip to the Secretary of State, and may require payment of a small fee. Much like real property, personal property that is titled in the name of the trust will transfer to the intended beneficiary immediately upon the death of the grantor, and it will not be necessary to distribute these items through the probate process.

If you would like more information about the proper way to fund a trust, please do not hesitate to contact Andrew Byers, Attorney and Counselor at Law. Serving clients throughout the metropolitan Detroit area, we can be reached at 248.301.1511.

Monday, August 10, 2015

Disposing of Tangible Personal Property in an Estate Plan

I am not sure how I would like to distribute my fine china and jewelry. Do I need to decide this at the time of drafting my will? 

When it comes to estate planning, there are two types of property: real and tangible. Basically, anything that is not land and/or a structure falls within the tangible personal property category – including cash, accounts, assets, boats, cars, jewelry, furs and so on. Generally speaking, testators (those creating a will) are pretty set on how to transfer the family home or vacation property – and, if not, will direct the executor to liquidate the property and add it to the residuary estate. 

However, when it comes to heirlooms and tangible items of great sentimental value, making the decision can be more difficult and may take more time. As well, a testator’s feelings may change over time, or the intended beneficiary might predecease the testator. Therefore, Michigan law allows for a document known as a Tangible Personal Property Memorandum (or a Memorandum of Wishes) to accompany the Last Will and Testament, which may be changed and amended over time according to the testator’s wishes. 

Basics of a Memorandum of Wishes

A Memorandum of Wishes must be signed by the testator, and may be handwritten or typed. Under Section 700-2510 of the Michigan Compiled Laws “a writing in existence when a will is executed may be incorporated by reference if the language of the will manifests this intent and describes the writing sufficiently to permit its identification”.

With regard to the first requirement, an experienced estate planning attorney can help ensure that a Will is drafted to contain a section referring to a Memorandum of Wishes, which is quite simply accomplished by including a small section explaining that any accompanying Memorandum is to be upheld along with the Will. 

Secondly, the Will must include language to assure the executor that the testator, in fact, intended to create the Memorandum of Wishes and that his or her tangible personal property should be divided based on the language of this document. Oftentimes, these two requirements are combined into one short Article contained in the Will, and a blank Memorandum will be included along with the estate plan for the testator to use as needed. 

If you would like to discuss the specifics of a Memorandum of Wishes, or would like to review your current plan, please contact Auburn Hills, Rochester Hills and Troy estate planning attorney Andrew Byers: (248) 301-1511. 

Thursday, July 23, 2015

Understanding the Unique Taxation Standards Applicable to IRA Distributions

I have most of my every-day checking and savings accounts titled in the name of my revocable trust. Should I take the same steps with my 401(k) and retirement investments? 

For clients with a single or joint revocable trust, retitling assets into the name of the trust not only accomplishes the goal of its creation, but ensures the seamless and effortless transition of personal and real property to beneficiaries when the time comes. However, trust creators (known as grantors) are highly cautioned to speak to an elder law attorney prior to retitling retirement accounts or transferring those assets into trust, as a hefty and unexpected tax bill may follow. 

Tax implications of retitling a retirement account

401(k) accounts and IRA’s can reap significant tax savings if withdrawn correctly and at the right time. By contrast, account holders can expect a massive tax penalty for withdrawing too early – or even inadvertently. 

Under current IRS rules, retitling a 401(k), 403(b), or Individual Retirement Account will be treated as an outright withdrawal of funds, even if the actual funds in the account are never actually spent. Therefore, the retitle will trigger a tax penalty congruent to the amount in the account for the transfer tax year, which can be especially significant for accountholder with high account balances. 

Safe ways to ensure the proper transfer of IRA assets

When it comes to leaving retirement account assets to a beneficiary, the easiest, simplest, and safest way to accomplish this task is to change the beneficiary designation on the account. This is accomplished by simply contacting the bank or investment firm and filling out a Change of Beneficiary form. Many accountholders choose an alternative beneficiary in the event the primary beneficiary predeceases the accountholder, but this is not always necessary. Then, when it comes time to distribute the assets upon the death of the accountholder, the funds will not only pass outside of probate, but will transfer directly to the beneficiary tax-free. 

If you have questions about proper estate planning or beneficiary designations, please do not hesitate to contact Andrew Byers, serving Auburn Hills, Rochester Hills and Troy, Michigan, by calling (248)301-1511. 

Thursday, July 16, 2015

Funeral Planning for Medicaid Eligibility

Are there any other less common ways to protect assets during the Medicaid planning process?

When it comes to planning for long-term care, many couples and individuals opt to pre-plan to eventually qualify for Medicaid coverage. While the thought of applying for need-based Medicaid coverage may seem unlikely for many middle-class individuals, the rising costs of long-term care – particularly for couples needing care together – is enough to deplete a sizable nest egg in just a few short years. 

The keystone of Medicaid planning is reducing one’s assets to the allowable threshold in order to reach the financial-need eligibility criteria. However, planners must be careful when transferring assets as Medicaid will impose a penalty period to address any transfers made during the five years immediately prior to the application for benefits. Fortunately, there are several other financial options to accomplish the “spend down” of assets other than outright transfers, sales or gifts, such as pre-planning for a memorial service, funeral, and/or burial plot. 

Earmarking assets for funeral costs

Pre-planning one’s funeral is hardly the most pleasant way to spend an afternoon. However, this important – and relatively simple – step can help avoid the hassle and inconvenience of “crisis planning,” or quickly planning for Medicaid eligibility at the last minute. 

Under the applicable rules, money spent on prepaid funeral arrangements and an irrevocable burial contract is not “counted” as either part of an applicant’s assets or as a penalty-inducing transfer. Taking this step can also help alleviate the financial burden for surviving family members who will be left to foot the final bill after all assets have been depleted by nursing home costs. 

When funeral planning, be sure to find a reputable entity to complete the task – and purchase a spectrum of services necessary to cover the service and burial – including the headstone and engraving costs. Be sure to pay the entire bill in full, as payment plans or credit arrangements will not allow for the maximum possible exemption for Medicaid applicants. Lastly, be sure to work with a reputable Michigan elder law attorney before making any purchases, as the timing of the prepaid funeral plan purchase is important, particularly for couples. 

If you are considering long-term care planning and would like to discuss your options with a reputable Auburn Hills, Rochester Hills and Troy, Michigan elder law attorney, please contact Andrew Byers today: (248)301-1511.

Friday, June 26, 2015

Estate Planning for a Special Needs Child or Relative

My niece will need lifelong care due to a developmental disability, and I’d like to include a provision for her in my estate plan. How can I ensure this will not interfere with her eligibility for benefits? 

Estate planning to include a special needs child or relative should be done with great care and consideration of the beneficiary’s financial situation. While it is undoubtedly noble to provide for the regular care and maintenance of a loved one, many special needs individuals also receive benefits from both benevolent charities and government programs – some of which may be needs-based. In order to ensure the beneficiary receives the financial care he or she needs – while also helping to maintain this eligibility status – be sure to meet with an experienced estate planning attorney in Auburn Hills as soon as possible. 

Planning for a Government Beneficiary Recipient 

Proper precautions should be taken when estate planning for the benefit of an individual receiving Supplemental Security Income (SSI), Medicaid, and/or Social Security Disability Income (SSDI), as these programs operate based on a recipient’s financial need. Leaving a lump sum outright or in trust for a government beneficiary will drastically increase his or her personal asset calculation, and could actually work to impose a penalty (i.e., loss of benefits) for months – or even years – after receiving the gift. 

A better option is a tool known as a Special Needs Trust (SNT), which allows the grantors an opportunity to appoint a trustee over the funds, which are held entirely by a third-party for the benefit of the special needs individual. During the person’s life, the corpus of the trust is not accessible and may only be distributed in the sole and absolute discretion of the appointed trustee. From the standpoint of the federal and state governments, these assets are not considered within the control of the beneficiary, and will therefore not preclude him or her from receiving much-needed government assistance. 

Special needs planning is a highly-specific area of law that should be left to one with experience and wisdom. In addition to properly arranging the inheritance, other considerations could include the implementation of a guardianship over his or her person and property – as well as several other legal procedures that may become necessary. 

For help with special needs planning, please do not hesitate to contact Auburn Hills attorney Andrew Byers at (248)301-1511 today. 

Thursday, June 18, 2015

Married Couples Should Consider Separate Trusts

What are the benefits of separate trusts?

Estates worth less than a certain amount of money are not subject to Federal estate taxes.  This is called the estate tax exemption and while this amount has changed numerous times over the past few years. it currently stands at $5.43 million.  Therefore, all estates with a total less than $5.43 million are not subject to estate taxes.  The exemption is portable between spouses meaning that a married couple benefits from an over $10 million dollar exemption together.  

Beneficial tax treatment under a lower estate tax exemption was one major reason why using separate trusts for married couples was a popular tool in the past. Now, with the increased estate tax exemption, some might think that separate trusts are no longer needed.  But, even with the decreased need due to an increased exemption amount, separate trusts still have many benefits. For example, separating assets into respective spousal trusts can help protect assets from creditors.  If one of the spouses dies the surviving spouse can access the deceased parties trust .  But, the surviving spouse’s creditors cannot.  Many joint trusts do not include this protection from creditors.  

Using separate trusts can also protect families in the event of remarriage.   Many times, an individual remarries after the death of his or her original spouse.  By using a separate trust model, the individual’s new husband or wife may be prevented from benefitting from the dead spouses trust after the death of the surviving spouse. While the trust can be written to allow the surviving spouse the ability to amend the beneficiary distributions from the original trust, it is rarely done.  However, separating trusts also allows the surviving spouse the ability to amend his or her own trust to provide access to the second husband or wife.

In contrast, many joint trusts are irrevocable at the spouse’s death meaning that the surviving spouse is prevented from changing anything regarding the joint trust.  With separate trusts, the spouse can amend or revise his or her trust up to the point of his or her death. 

Separate trusts can also be useful in the event that the surviving spouse needs nursing home care.  If special provisions are included in the Last Will and Testament of the first spouse to die, the assets that were contained in that spouse’s separate trust can be protected from a Medicaid spend-down in the event that the surviving spouse needs nursing home care.  Such provisions should be considered whenever either spouse is diagnosed with a medical condition that could result in the need for long-term care.

If you are planning an estate you should consider all of your options including a joint trust, separate trusts and various other options.  Andrew Byers is an estate planning and elder law attorney in the Auburn Hills and Troy, Michigan area. Contact him today at (248) 301-1511 with for all of your estate planning needs.


Wednesday, June 03, 2015

Recent Holding by Michigan Court of Appeals Upholds Medicaid Eligibility Penalty for Home Health Aides

How do payments to home health aides impact Medicaid eligibility in Michigan? 

In Michigan, as is the case elsewhere, eligibility for Medicaid enrollment is entirely needs-based, meaning an applicant must be financially unable to pay the costs and fees associated with his or her medical care. Currently, Medicaid is the only government-funded healthcare program that covers the costs of long-term care, as Medicare only covers a nursing facility stay up to 120 days. 

In order to qualify for Medicaid, an applicant must show a lack of personal assets and a total inability to pay for medical bills individually. Accordingly, state and federal authorities will closely scrutinize an applicant’s financial situation, primarily focusing on any transfers or divestments made over the past five years. If an asset transfer or divestment has occurred, and the applicant could have used those funds toward his or her stay in the long-term care facility, a penalty will apply congruent with the amount of time those funds could have covered daily nursing home costs. 

Home Health Aides and Medicaid 

A home health aide is someone who regularly visits an individual’s home for purposes of providing routine medical care and/or assists with the administration of medication or other treatments. Home health aides are generally not expected to provide round-the-clock care, and are usually only appropriate for those individuals who are still able to manage several daily care tasks on their own. 

In one recent case, an elderly Michigan woman with dementia paid over $19,000 for home health services prior to her admittance to a nursing home. Once her funds were depleted, her family applied for Medicaid to cover the costs of her stay. However, agents concluded that the money she spent for the home health aide did not meet the stringent test set forth by Medicaid regulations, and she was penalized for 7 months before her benefits would be accessible. In the interim, she passed away leaving her family with an enormous debt to cover from an already-depleted estate. 

Thereafter, the family’s elder law attorney appealed the decision to the local Circuit Court, which held that the burdensome five-part test for home health aide divestment eligibility only applied when the caretaker is a family member related by blood or marriage, as the risk is higher in these situations for fraud to occur. 

Unfortunately, the Court of Appeals was given an opportunity to review the case as well, and agreed with the original opinion by the administrative law judge tasked with deciding the applicability of the home health aide eligibility penalty. 

If you are concerned about Medicaid eligibility and would like to speak with a qualified and experienced elder law attorney that serves the Auburn Hills area, please contact Andrew Byers by calling (248)301-1511 today. 

Tuesday, June 02, 2015

Using the Michigan ‘Lady Bird’ Deed as a Medicaid Planning Tool

What is a ‘lady bird’ deed? And how can it help me with Medicaid eligibility? 

Under Michigan law, a ‘lady bird’ deed is an elegant-sounding designation for a relatively common type of real property interest formalized in a document.  This interest is that of an enhanced life estate interest. 

A life estate is a type of real property interest that may be granted to a person for the duration of a person’s life. For example, a parent might transfer a piece of lakefront property to his or her son that includes a life estate, allowing the parent to use the property exclusively until his or her natural death, at which point, the ownership would transfer directly to the son. However, a traditional life estate is incredibly limiting for the grantor, and essentially prohibits him from encumbering the property with a mortgage or allowing it to fall into disrepair without the threat of liability. Moreover, transferring a real property interest subject to a regular life estate to a loved one during the five-year Medicaid “look-back” period could trigger a temporary penalty congruent to the value of the property. 

By contrast, an enhanced life estate – known as a “lady bird deed” in states like Michigan, Florida or Texas – is far less restrictive. For instance, the party grating the life estate may encumber the property, sell the property, or otherwise maintain complete control over the asset for the duration of his natural life. Perhaps a confusing type of property interest transfer, the Lady Bird deed allows for a number of benefits, particularly with regard to Medicaid eligibility. 

Using the Lady Bird Deed as an Estate Planning Strategy

Under Medicaid guidelines, an applicant is only eligible upon a showing of true financial need. In other words, the applicant has no personal assets to sell in order to pay for medical benefits, and has essentially met the “needs-based” guidelines set forth by state and federal authorities. 

While financial need is the hallmark of eligibility, applicants are not expected to be without shelter in order to qualify. Accordingly, an applicant’s primary personal residence is generally not “counted” against him or her for purposes of receiving benefits. However, any other residence (i.e., second home or investment property) must be disposed of for market value prior to the five-year look-back period in order to avoid penalties. If an applicant transferred property to a friend or loved one and retained a traditional life estate, this transfer will likely result in penalties when the party with the life estate applies for Medicaid benefits. However, if the life estate is under the terms of a lady bird deed, Medicaid views the property as under the control of the applicant, and will consider the property as a primary residence.  

If you are considering Medicaid eligibility, or would like to discuss long-term care options with an experienced Auburn Hills elder law attorney, please contact Andrew Byers by calling (248)301-1511. 

Tuesday, May 26, 2015

The Power of Attorney: How Important is This Estate Planning Component?

I am preparing to execute my first estate plan, and I always thought I just need a Last Will and Testament. Is a power of attorney necessary? 

A power of attorney is an estate planning tool that most experienced Michigan estate planning attorneys will include in a comprehensive portfolio. While it is true that a Last Will and Testament or revocable living trust are the cornerstones of a properly-drafted plan, there are a number of corollary documents that are equally as necessary to ensure the entire estate plan works interactively to achieve your goals, including a power of attorney. What’s more, is that this fundamental document can help avoid the costly experience of petitioning for conservatorship over a loved one who is no longer capable of executing legal or financial documents – which is explained more thoroughly below. 

What is a power of attorney?

In Michigan, a power of attorney is a formally-executed document that creates an agency relationship between the principal (yourself) and the individual(s) you choose as agents to act on your behalf. The document may be very limited in scope or extremely broad, the latter affording the agent authority to engage in virtually any transaction on your behalf. The document must be witnessed and notarized, and may be revoked at any time. 

Why do I need a power of attorney? 

A power of attorney is necessary to finalize any transaction requiring your signature at which you are unable to appear or participate. At your direction, you may authorize your agent to sign tax documents, conduct banking business, pay your bills, engage in litigation, execute a contract or sell real estate. At a minimum, the document allows for increased convenience and alleviates your need to appear in person if you are unable. The document also will be necessary should you reach a point of incapacity and are no longer deemed competent to handle your own affairs. 

What happens once I am deemed incompetent?

If you are considered by at least one licensed physician to be under the effects of mental incompetence, your agents may continue to rely on the power of attorney – provided it is a “durable” power of attorney – to conduct your affairs on your behalf. Otherwise, your loved ones will be required to petition the court for a conservatorship over your person and property, which is an expensive legal exercise that may take several weeks or months to conclude – particularly if there is an objection. 

If you are considering the best way to execute an estate plan and would like to discuss your options, contact experienced Auburn Hills estate planning attorney Andrew Byers by calling (248) 301-1511. 

Tuesday, May 19, 2015

Forty Years After Death, Philanthropist Gives $13 Million

Can an estate plan provide for one's family and friends and still benefit charity in the future?

The passage of time proved no obstacle to a late philanthropist who was determined to give to charity.  Leave A Legacy, in Southeast Michigan, announced that it had received $13 million from Dick E. Morand, who died in Detroit, Michigan in 1977.  The funds will benefit five non-profit organizations.

Morand's wife had passed away in 1976 and the two were childless.  The founder and owner of D.E. Machinery Company, he had placed his assets in a charitable remainder annuity trust (CRAT), which provided payments to beneficiaries he had named, with the remainder to go to charity when they were deceased.  In 2013, the two remaining beneficiaries of the trust passed away.  That meant the assets could be distributed to charity.  Five organizations received $2.7 million each.

The delayed gifts is an object lesson not only in generosity but also in how one can preserve one’s wealth, leave money to friends and loved ones, and still give to charity.  Charitable remainder trusts enable you to generate a stream of income from assets, enjoy tax advantages, and specify the organizations that will ultimately receive your wealth.  Because of the tax treatment of these trusts, in addition to accomplishing worthy long-term goals, you may also receive a generous current tax deduction.

 A CRAT is one of a variety of such strategies that can help you benefit your family, a charity, or both.  Options may include a charitable lead trust (CLAT) and a variety of other revocable and irrevocable lifetime trusts and testamentary trusts, depending on your goals and wishes.

Regardless of how much wealth you have now or expect to leave behind, the law firm of Byers & Goulding, PLC can help you draft an estate plan in a way that meets your family and charitable giving goals.  From simple wills and long-term planning to complex trusts, we provide the sound, trusted advice on how to do the most good for your loved ones and the organizations you believe in.  For a consultation, call our experienced Michigan estate planning attorneys (248) 301-1511 today.

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