Redmond, Streed & Yokom Law Office Blog

New Year’s resolutions are a great idea, but many times we do not follow through with them.  In fact, statistics show that sixty percent of the people who signed up for a gym membership no longer use it.  When it comes to making a New Year’s resolution regarding updating or setting up your estate plan, it is one resolution you should keep. So many individuals procrastinate on setting up an estate plan because they cannot imagine anything bad will happen to them in the near future.  Unfortunately, families constantly face issues with regard to Special Needs children, parents dying without designating a guardian for their minor children, individuals dying leaving assets to children who are not mature enough to manage those assets and many other issues.

Setting up an estate plan is not as difficult as many would think, but it is a very important New Year’s resolution to keep.

So many people are concerned about the State of Michigan taking their home.  What many people need to understand is that the only reason that the State of Michigan even becomes involved in issues regarding your home or liens on your home is if you begin receiving Medicaid assistance in a nursing home.  In 1993, the Federal Government advised every state that they should enact an “Estate Recovery Program” and Michigan decided to ignore their instructions and put off enacting such a program until July 1, 2011.  At this time, the current Medicaid Recovery Act allows the State of Michigan to file a lien against homes that passed through the Probate Court process. Currently, there is nothing in place that allows the State of Michigan to recover against a home that does not pass through probate.  Although we anticipate that we will see legislation that may allow for this down the road, there are ways to protect the home even if Medicaid is being received.  Having said that, there is a concern that Estate Recovery measures will increase exploitation of the elderly and family members should consider consulting a qualified Medicaid or Estate Planning attorney before buying any financial or legal products which may claim to have magical qualities that allow you to avoid the Estate Recovery Act.

Over and over I hear the comment, “why is it that my assets have to go through probate if I have a Will?”  The answer is quite simple.  A Last Will and Testament is a document designed to give instructions to the probate court on how you would like to pass your individually owned assets.  If at the time of your death, you own your house in your name, bank accounts and/or investments, and there is no joint owner or beneficiary option, those individual assets are frozen until the court can appoint an executor under your Last Will and Testament.  The Will provides a guideline not only for the court, but for other family members to identify who is to serve as the executor or personal representative of the estate and how you would like your assets divided.  Having a Will may not avoid probate, but it is better than having nothing at all.  Without a Will, there is no indication of who is to serve as executor and how you would like your assets divided.  Although individually owned assets under a will do go through the probate court process, it at least provides a summary of your wishes.  If your goal is to avoid probate, then you need to consider a living Trust instead.

Continuing on the common fears of many people in their golden years, is myth number two and many of those fears are related to long term care.  Too many family members believe that they can transfer all of their wealth to their children and qualify for Medicaid.  Medicaid is welfare through the state and federal government and closely scrutinizes what people do with their money prior to entering a nursing home and applying for Medicaid.  The problem is that many people feel that they can transfer their money to their children and their children will hold these funds in case they need them.  What they do not realize is that these children may have medical expenses, financial problems or they may even face divorce and these funds could suddenly disappear even though the ultimate intent was to hold them for the parents.  Obviously, as with any estate planning or long term planning, waiting for the government to make the decisions for you is not the best option.  If you are still at an age where you can consider long term care insurance, it is important that you do so.  It can protect not only your spouse, but it can protect the inheritance that you want to leave to your children.  With the proper planning and long term care insurance, dealing with the government and/or medicaid will never become an issue.

When we think about all of the money that was donated in 2010 by individuals, over $200 billion, it is important to understand all of the options that we have when it comes to giving.

Charitable gifts can be something as simple as putting a check in the mail and allowing the charity to decide how to spend the money, or the gift can be more specific and be attached to a specific fund or a specific use.  Many times when people give and they want the money to be used for a very specific use, it is placed in an endowment fund.  Not only are these funds earmarked for a specific use, in many endowment funds, the charity is only able to use the income, but the principal remains intact.  The gift lives on in perpetuity and ensures that the money will be there in years to come and will always create a steam of income for the charity.  When making a lifetime charitable gift it is important to consider whether you want them to have immediate access to all of the money or whether you want some restrictions.  When it comes to long term planning, such as in a Will or Trust, some other considerations you may want to make is whether you should give the charity a dollar amount or a percentage of your estate.  With a percentage, it ensures that the charity receives something along with your family regardless of your net worth.  With a dollar amount, you know the exact amount the charity is going to get, but many people are concerned that should they spend a lot of their money later in life that the dollar amount may ultimately exceed what their family would get.  Making a gift of a specific dollar amount in your Last Will and Testament or Trust is a great option, but may require that you revisit the amount of that gift periodically.

With a variety of relationships occurring these days, many people are not getting remarried.  Many people are living together and moving in with their significant other.  Although the arrangement may be a financial benefit for both of the parties there are some estate planning issues that need to be addressed.  What if the boyfriend owns the home and he dies, will the children or family of the deceased boyfriend allow the girlfriend to live in the home an unlimited amount of time?  Or, will the family give her three days notice and ask her move out?  When your living arrangements are non-traditional and someone is living with you, you may need to revisit your estate plan to ensure that that boyfriend or girlfriend is allowed to live in the home for a period of time until other housing can be found and that the family knows your wishes regarding the living arrangements.  Estate planning is not just for married people, it is for anyone who wants to make sure that their wishes are known and provide for another individual in their life.

Many times when family members are providing the care for a parent or grandparent those family members must cut back on their regular job or even quit their job to be able to provide a high level of care.  In many of these situations, the care giving family member would like to be compensated for the time they spend caring for their family member.  Unfortunately, it is not as simple as just having mom or dad write the family member a check.  If the family member that is being cared for ultimately has to go into a nursing home and applies for Medicaid, Medicaid will scrutinize the payments that were made to the care giving family member.  In order to make it official there needs to be a contract in place that identifies the services that are going to be provided and who will be the care giver.  The contract must also indicate that payment needs to be reported as income by the care giver.  Failure to follow these procedures could ultimately result in a parent being denied the right to Medicaid.

When it comes to aging gracefully there are a lot of pro-active steps that we can take as opposed to reactive.  Well known baseball legend Mickey Mantel once said, “if I’d known I was going to live this long I would have taken better care of myself”.  As I deal with clients on a daily basis who are facing mental and physical issues, it is never too late to plan ahead.  If you have a family history of degenerative eye disease, Parkinson’s, cancer or any other debilitating illness, there are some basic things that you need to have in place.  Obviously, having your estate plan up to date so that individuals can act on your behalf if you cannot is important, but it is also important that you start taking a look at your living environment and whether it will be conducive to the medical condition.  For example, if you have macular degenerative disease, will you be able to continue to live in your home and can you begin making it more user friendly as your eye sight deteriorates.  If you are suffering from Parkinson’s disease, will you be able to drive or will you be able to do something as simple as writing a check.  Again, do you have people in place to assist you with these things.  Avoiding these medical conditions and refusing to discuss them with your family will not put you in a better condition should they occur, but in a crisis mode.  Aging gracefully can be accomplished by all of us.

Many individuals have made specific provisions in their Will or their Trust for a specific piece of real estate to go to a child or even specific stock to pass to a beneficiary. It may be important to revisit this provision in your estate plan to make sure that you account for new rules under the Michigan Probate Code.  Under the Michigan Probate Code, if your estate plan provides for a specific gift to your beneficiary and that item does not exist at the time of your death, that beneficiary is due to receive something of equal value, unless your estate plan provides otherwise.  For example, if you provide for your daughters to receive the Disney stock, you would need to indicated that if the stock has been sold prior to your death that this gift lapses.  If you do not provide for the lapse in the gift, then the Trustee will be obligated to replace that sold stock with something of equal value.  Another change made by the Michigan Trust Code relates to the gift of real estate. If you have made a specific provision for a beneficiary to receive real estate and are silent as to whether any outstanding mortgage should be paid off as part of the estate, the Michigan Trust Code provides that it is your intention to pass that debt along with real estate.  Again, if your estate plan says that the real estate is to go to your son and it is silent on payment of the mortgage, the mortgage will not be paid as part of the ordinary course of trust administration debts and expenses, but the debt will pass to your son.  Reviewing your estate plan on occasion is important to make sure that not only is your Trust up to speed with the current laws, but that it currently reflects your wishes.

Sometimes there are words that just go together like Yin and Yang. In the estate planning business, the words Guardian and Conservator are many times spoken as if they are one in the same. However, a guardian and a conservator can be two completely different individuals. A guardian is the person that oversees the custody of your minor children where as a conservator is an individual that oversees the money that you leave to a minor child. Although many couples choose to make the guardian and conservator the same person, it is not always necessary. Just because you think that someone is a good person raise your children does not necessarily mean that they are the best person to manage that child’s money. When designating a guardian and/or conservator in your Will, it is important that you view these independently and make sure that the person that you are naming is the best person for the job.

When it comes to estate planning there are many related aspects of an estate plan that must be considered. For example, if you are small business owner it is equally important to make sure that your business succession plan is in order as well. In many situations, the business is a significant part of an individuals entire estate and yet many times addressing issues as to the value of the business, the future sale of the business or any succession plan is put on the back burner. The benefit of setting up an estate plan is that it forces you to address all of the various assets that you own. Not only does estate planning cover who will inherit your home, your life insurance or your retirement benefits, but it will also force you to address your company and what planning you have done to ensure that the value passes on to your heirs.

Before you say “I do” many issues need to be discussed. Unfortunately, many times the “I do’s” usually turn into “I don’t’s”. Making sure that you have reviewed your finances with your spouse-to-be is important. It is important to not only discuss your finances and outstanding debts, it may be even more important to also address the issue of a Pre-Nuptial Agreement. Many times one of the spouses may have significant retirement accounts, a business that was set up well before the marriage or there may be a possibility of inherited assets. A Pre-Nuptial Agreement addresses how assets are going to be held during the marriage and ultimately how they are going to be handled in the event of divorce. Talking about your finances before the “I do’s” and/or a Pre-Nuptial Agreement is not romantic. However, it may be necessary to ensure your future wedded bliss.