As Mount Clemens, Michigan trust attorneys with a wealth of experience, we have spoken with countless clients over the years. They are making very important decisions, so communication is key. We answer all questions thoroughly, and we provide detailed explanations, because we want people to make fully informed decisions.
In this blog post, we will look at some questions that we are often asked, and we will provide brief answers. This will give you a basic foundation of information to draw from, and there are other resources on this website that you can utilize to learn more.
What happens if I don’t have any estate planning documents?
If you do not have a last will or a trust at the time of your death, the condition of intestacy will be the result. Under these circumstances, the probate court would step in to determine how your assets should be distributed. The court would appoint a personal representative to handle the state administration tasks.
The exact intestate succession laws vary somewhat state-by-state. As we have stated, we are Michigan-based trust attorneys, so we will explain the laws that are in place in the state of Michigan. If you pass away with surviving children but no spouse, the children would inherit the entirety of your intestate estate.
Conversely, if you leave behind a surviving spouse and no children or parents, your spouse would inherit everything. Interestingly enough, in Michigan, if you leave behind a spouse and parents, your spouse would not receive all of your property. Your spouse would inherit the first $150,000 of your intestate property and three-quarters of the balance. Your parents would inherit the rest. These are a handful of the most common scenarios, but there are laws to address every possibility.
Even if your property would be distributed in accordance with your wishes under these laws, there are reasons why you should still have an estate plan. It can be time consuming for all of this to play out without any clear cut directions, and there can be disputes when your wishes have not been recorded in writing.
Will my estate be subject to taxation?
Generally speaking, inheritances are not subject to regular income taxes. Plus, appreciated assets are given a step up in basis. To explain by way of example, let’s say that your uncle paid $100,000 for some stock that he bought 20 years ago. He leaves it to you in his last will, and it is now worth $1 million. For tax purposes, the step up in basis would preclude you from tax responsibility for the $900,000 in appreciation.
At the time of this writing, there is a federal estate tax, but most states are not subject to it. The estate tax exclusion is the amount that can be transferred before the estate tax would be applied. In 2018, the exclusion has been $11.2 million, and the maximum rate is 40 percent. We should point out the fact that there are some states in the union that impose state-level estate taxes, but Michigan is not one of them.
Trusts are only for the wealthy, right?
This is a very common misconception that many people harbor. First, it is important to understand that there are different types of trusts. There are irrevocable trusts that are used by some wealthy people and individuals that are trying to accomplish somewhat complicated objectives. However, there are also revocable living trusts that can be useful for people of relatively ordinary means.
One major reason why a revocable living trust can be a good choice is because of the fact that the assets in the trust can be distributed outside of probate. If you use a last will instead of a trust as your vehicle of asset transfer, you would name an executor or personal representatives. Under state laws, the executor would handle the estate administration tasks, but the probate court would provide supervision.
Probate is time-consuming, typically taking four months to a year in simple cases, and the heirs to the estate do not receive their inheritance while the process is underway. It is also expensive. There are court costs and legal fees, and the executor is entitled to remuneration for his or her time and effort. With a living trust, the assets can be distributed to the beneficiaries outside of probate. This is a major advantage, but there are many others.
Attend a Free Seminar!
Our trust attorneys are holding a number of seminars in the upcoming weeks. They are free to attend, but we do ask that you register in advance. You can visit our seminar page to obtain all the details.