Wills, Trusts; Estate and Retirement Planning

• **** QUICK LINKS FOR EASE OF READING PAGE & NEED AN INTRO AND SUMMARY OF INFORMATION ****
• TESTATOR ? DEVISEE ?
• SIMPLE WILL
• MARITAL PROPERTY
• SHOULD EVERYONE HAVE A WILL?
• JOINT PROPERTY & AVOIDING PROBATE
• PROVIDING FOR CHILDREN
• CREATING A TRUST UPON DEATH
• STATUTORY REQUIREMENTS
• LAST WILL AND TESTAMENT
• DOCUMENTS DRAFTED ARTICLE
• PAYMENT OF DEBTS
• TAXES AND EXPENSES
• POWER AND AUTHORITY OF FIDUCIARIES
• DURABLE POWER OF ATTORNEY (LIVING WILL)
• GENERAL DURABLE POWER OF ATTORNEY
• FEES
• TRUST INCOME TAXEES
• SPECIAL NEEDS CHILDREN / ADULTS WITH DISABILITIES

The word “Testator” ( the masculine) and the word “Testatrix” (the feminine) refer to one who executes (signs) a will. A “Devisee” is a person who takes property under a will and an “Heir” is a person who takes property by operation of law when no will exists. The “Personal Representative” is a person authorized to administer and distribute the estate in a manner that comports with the will and applicable law. You may designate co-personal reps but I do not recommend having two reps for efficiency’s sake. The personal rep and the alternate rep should be selected with great care. Consider only those people with impeccable character. Notify your personal rep/trustee(s) of your intentions and give them a copy of this sheet and the operative document.

A simple will usually names the spouse as the beneficiary to whom all property passes, after the payment of legally enforceable debts, funeral expenses and expenses of the Testator’s/Testatrix’s last illness and administration expenses, providing the spouse is still living.

Marital property : If all property is held by husband and wife, there is technically no need to have a will since all property passes automatically to the surviving spouse by operation of law. However, should both die in a common accident, or should a surviving spouse fail to convert the property into some joint tenancy or fail to execute a will, the estate upon death is probated and termed “Intestate.” Probate estates should be avoided due to high probate, attorney, and administrative costs.

Should everyone have a will? Answer: Yes! I recommend that everyone have a will in the event that they may incur some windfall (you could win the lottery you know!) and fail to have a plan in order.

Joint Property and Avoiding Probate : Property held by two or more people as “joint tenants with right of survivorship” will pass automatically to the surviving tenants by operation of law. This is the simplest and cheapest way to distribute property if the joint tenants are trustworthy; some tenants have been known to close the account and fly to Aruba. One danger in this arrangement is that the creditor of any joint tenancy accounts can be attached by creditors! As a general rule, joint property must be disclosed to the estate and the state, but are not otherwise subject to the probate process. Medicaid has a three year look-back rule for coverage of medical expenses. The three year rule says that any gift made within three years of death will be deemed to be a transfer made in contemplation of death. Any transfers in contemplation of death will automatically be considered part of the estate for medical payment purposes. To avoid complications under the three year rule, I recommend that you contact me.

Remember that upon death an individual’s property may pass under either the laws of descent and distribution (probate) or by other means such as property or contract law. If property is held by individuals jointly with rights of survivorship, then upon the death of one party the property automatically passes to the surviving joint tenant. Also, with certain types of property, such as insurance policies, the individual can designate a beneficiary to receive the proceeds of the policy, and the amounts payable upon the death of the individual pass to the beneficiary under contract law.

If property does not pass under any of these methods, then it passes according to the laws of descent and distribution. Under these laws, there are two structures for property to pass. First, if an individual has a Last Will and Testament, then the property passes according to the terms of such document. Alternatively, if the individual does not have a Last Will and Testament, then the property passes according to the laws of the State of Michigan. Property is subject to probate administration under the laws of descent and distribution regardless of whether the property passes to the recipients with or without Will.

The primary disadvantages of joint property are: 1) once you add a joint tenant, that person has an ownership interest in the property. Depending upon the nature of the property conveyed, that person could have unchecked access to the property or the joint holder could petition a court to forcibly severe the property and force a sale. For example, if it’s a bank account, one joint tenant could cash-out the entire account! For real property, however, title companies generally require all tenants to sign a deed. 2) since the added joint tenant is presumed to be an owner of the property, and upon the death of the principal owner(s), the property automatically vests in the joint owner. If the joint owner transfers the property in violation of your wishes, there is little the remaining heirs can do shy of a messy lawsuit. The heirs would be required to file a lawsuit to overcome the presumption of ownership by the surviving joint owner and to have the property brought into the probate estate. This “worst case scenario” results in the property being subject to the probate court administration, which the use of joint property attempts to avoid. It incurs additional expenses over and above the cost normally associated with probate administration as a result of the litigation. 3) complications may arise with respect to certain taxes assessed against the surviving owner. Without a trust, complicated IRS rules apply and capital gains assessed against co-tenants when they sell the property, often substantial, and well more that the cost of a trust. Please contact me to arrange for a trust to alleviate problems with the Uncle Sam’s capitol gains tax.

Providing for Children : Some wills are designed for use when there are minor children and/or children whose property should be held and managed by a trustee, in the event that both spouses pass away. Management continues until they reach a designated age . The will may appoint a guardian for minor children in the event that the other parent is no longer living.

Creating a Trust Upon Death : The will may also include a provision granting a power in trust over any property passing to any person who is under a designated age, e.g. a young grandchild. A simple will is not intended as an all-inclusive document for use by everyone and will not be appropriate in many instances. It will avoid the inconvenience of intestacy, designate the Personal Representative and relieve the estate of the expense of a fiduciary bond.

Statutory Requirements : The will must be signed by the Testator/Testatrix in the presence of two witnesses and a notary public who should affix his or her notarial seal to the document. The witnesses and the notary should not be relatives or in any way interested in your estate. The Testator/Testatrix must first read the document carefully to be sure that it does reflect the maker’s wishes accurately.

The notary public before whom you are executing the will shall ask the following: that the maker and the witnesses, under oath, declare that the maker signed the will as his/her last will and testament; that it was signed voluntarily; that each witness, in the presence of the maker and at the maker’s request, and in the presence of each other, signed the will as a witness; and that to the best of the knowledge of each witness, the maker was at that time, eighteen or more years of age, of sound mind and under no constraint or undue influence. The maker should write his or her initials in the left-hand margin of each page of the will on which his or her signature does not appear. This prevents fraud.

The signed original will should be placed in a safe place where a designated member of the family, CPA, or other person will have access to it upon death. A safety deposit box in your name only is not a wise choice. Many Probate Courts will allow a Testator/Testatrix to place an original will on file with their office for safekeeping.

The document I will draft or drafted for you will have the following provisions:

The Article entitled PAYMENT OF DEBTS, TAXES AND EXPENSES of the Last Will and Testament provides for the payments of your debts, funeral and last illness expenses, as well as the expenses of administering your estates. The next Article entitled DISPOSITION OF PERSONAL EFFECTS provides for your personal effects to go to each other, if then living, and if not, to be divided equally among your then living children. This Article may provide a request that each child should be allowed to choose the items they so desire. If you want grandchildren to share in the personal property to the extent of their parent’s interest if their parent (your child) is not living at your death, please notify me and I will make the appropriate revisions. The Article entitled DISPOSITION OF RESIDUAL ESTATE provides for the balance of the estate to go to the devisee(s).

Another Article may provide that the property be shared equally among your children and, if one of your children is not then living, that deceased child’s share would be divided among the deceased child’s then living children. The Article entitled APPOINTMENT OF PERSONAL REPRESENTATIVES designates the Personal Representative and nominates an alternate to act as successor Personal Representative.

The next Article entitled POWER AND AUTHORITY OF FIDUCIARIES enumerates a number of powers and authority of the Personal Representatives. Another Article may provide that if both spouses die under circumstances making it difficult to determine who was the survivor, then the wife shall be deemed to have been the survivor. The next Article entitled INDEPENDENT PROBATE provides a request that your estate be administered by an independent probate, as provided by Michigan law, rather than being subject to a supervised court administration. With an independent probate, the Personal Representative, after receiving his or her authority from the Probate Court, does not need to file as many reports and documents with the Probate Court as in the case of a supervised court administration. This generally results in an independent probate being completed in a more timely fashion with less costs incurred. The next Article entitled DEFINITIONS provides that the terms “child,” “children” and “issue” shall include adopted persons, and this Article further provides that an individual must survive you for 30 days to be considered living at the time of your death except for the presumption of survivorship as specified previously. Another Article may provide that although spouses may execute Wills at the same time, the Wills are not joint Wills, and that each retains the right, at any time, to alter or revoke the respective Will. The final Article provides that the Wills should be governed according to the laws of the State of Michigan.

DURABLE POWER OF ATTORNEY FOR HEALTH CARE [“LIVING WILLS” IN MICHIGAN]

Durable Power of Attorney for Health Care [also known as a Designation of Patient Advocate Agreement] (DOPA). Michigan law permits a person to designate a patient advocate to act as agent with regard to the administration and the withdrawal of medical care. Be aware of the serious ramifications of such an election. While I can review specialized documents, for a nominal fee you may obtain pre- printed forms that comport with the state statute from Advocates for Better Care at P.O. Box 9145, Grand Rapids, Mi. 49509-0145; (616) 530-2864. While I generally agree that these forms comport with state statute, I am convinced that they are unsatisfactory in stating the philosophy that respects life and otherwise fails to proscribe active and passive euthanasia. Thus, I strongly recommend that anyone concerned about explicitly embracing the life embracing criteria in their DOPA should engage me to draft a document appropriate to your wishes.

First, a review of important background information is in order:

A DOPA grants an agent the power to make health care decisions on your behalf if you are unable to participate in your own decisions. The Patient Advocate should try to communicate with you even if you are unable to participate in the decision. Your agent specifically agrees that he will not exercise any power that you could not have exercised on your own behalf, receive any compensation, or act in a manner which is not according to the high standard of care applicable to fiduciaries. Your agent may decide to withhold care which may result in your demise.

It is my conviction that medical treatment should not include ordinary care given persons under natural law, namely the continuation of shelter, food, hydration, and sanitation by reasonable but not heroic efforts. There is a morally significant difference between medical treatment and supportive care. Consider first that the denial of food and fluids is biologically final because it will undoubtedly lead to death. Food and fluids are universal and ordinary human needs. Physicians should always aim to preserve life and never to induce death. Food and fluids are not medical treatment or therapy simply because another person provides it.

From a moral perspective, I agree that the DOPA should/may provide for the termination of medical treatment when 1. there is a terminal condition that will result in imminent death (usually a period less than that time which a person could survive without food or water), or 2. there is an irreversible coma which will result in a permanent loss of consciences and there is no possibility of returning to a sapient or cognitive state. The discontinuance of any medical treatment that would prolong the moment of death is equally justifiable, as is medication appropriate to keep one comfortable and free of pain. These agreements are revocable at any time.

GENERAL DURABLE POWER OF ATTORNEY

A General Durable Power of Attorney (GDPOA) empowers an agent to have certain powers that you, the principal, have. The General Durable Power of Attorney allows the agent to perform essentially anything for the principal that the principal could perform for himself or herself as long as the principal is alive.

One thing the agent cannot do for the principal with the General Durable Power of Attorney is to endorse U.S. Savings Bonds on behalf of the principal. Under the category Tax Returns, the document allows the agent to handle tax matters on behalf of the principal. However, the Internal Revenue Service requires a Power of Attorney to specifically enumerate the type of tax, along with the specific tax years, in order for the Internal Revenue Service to honor the Power. Therefore, I have inserted a provision providing for the agent to have powers concerning income and gift taxes for the five preceding years and the subsequent five years. However, after the expiration of the subsequent five-year period, amendments to the Power will be required to extend the authorization for later years. The IRS has a standard form that can be executed later if a lapse occurs.

By themselves, neither a trust, nor a will, nor a power of attorney, nor joint property, nor a designation of patient advocate will thoroughly complete your estate plan. The DPOA for health care is only part of a comprehensive estate plan. I highly recommend that anyone who executes these documents seriously consider having a thorough will, living trust, DOPA, and general power of attorney as the most prudent, private, and efficient means to establish a personal estate plan.

It is extremely important for personal and financial reasons to have a combination of all these documents. Spouses should never withhold information and documents of their estate plan. It only causes family strife and stress. If you withhold documents and information, regardless of the size of the estate, you need counseling more than I can give. I will be happy to tailor one to fit your needs; no matter how seemingly small. Please contact me if you have any questions.

FEES

My current fee schedule for documents that do not require advanced estate planning, do not require specially tailored documents for special needs children or special IRS planning is as follows:

Review of current estate plan for simple estate: $300

Review of current trust language and draft updated “no contest” and “trustee insulation” provisions against rouge judges: $1,000

Simple Will: $300 each*

Simple Power of Attorney: $300 each*

Simple Patient Advocate Agreement for Health Care: $300 each*

* = including 30 minute free consultation, if consultations by email and phone and fax and in person exceed 30 minutes, the rate is $200 per hour.

Standard Trust Package Including Will, Trust, POA, and PAA with supporting information and documents for

Single Person: $2,000 [compare at $2,500 to $4,000]

Husband and Wife Package: $2,500 [compare at $4,600 to $6,000]

Plus recording deeds to place real estate into the trust is an additional $40 per deed.

Important Note On Fees and Representation: Because single estates over $2,000,000 [married couples over $4 million] require technical, additional tax and estate planning, there will be additional fees that I will quote on a case by case basis. Additional fees will also be charged for review by the CPA of your choice for these estates. While I will always remain available to answer general questions for you and your family at any time, the representation of CHARLES KLEINBROOK, P.C. with respect to monitoring and funding the estate stops once the documents are signed. The client must understand that the firm will not be obligated to monitor, fund, or otherwise administer the trust unless hired to do so on an hourly rate basis. Thus, there will be no continuing representation.

NO PROTECTION FROM CREDITORS. IT IS VERY IMPORTANT THAT YOU UNDERSTAND THAT THIS PROCESS DOES NOT PROTECT YOU FROM YOUR CREDITORS. IF YOU WISH TO INSULATE YOURSELF FROM CREDITORS TO THE GREATEST EXTENT PERMITTED BY MICHIGAN LAW, THERE ARE ADDITIONAL DOCUMENTS YOU MUST EXECUTE. THESE RULES ARE FAIRLY COMPLICATED SO PLEASE CONTACT ME FOR MORE INFORMATION.

For adults with disabilities, be sure to do the following: 1. Apply for social security disability, but see me first with regard to denials and appeals. When granted, be sure that you are the Representative Payee on the checks and that there is an alternate. 2. Be certain to call 866-754-3398 to arrange a yearly Person Centered Plan from the Macomb/Oakland Regional Center. 3. It is best to attempt all documents short of probate court first. To accomplish that, be certain to meet with me to create a special needs trust, an authorization for release of information, a power of attorney, and a patient advocate document.

TRUST INCOME TAXES. On the death of the grantor, be sure to contact my office. The trustee must instruct the CPA to prepare and file the decedent’s final income tax returns and the Federal and State Estate and Inheritance Taxes. SPECIAL ATTENTION SHOULD BE GIVEN TO VERIFYING THAT THE APPROPRIATE K-1′S, 1099′S, INDIVIDUAL RETURNS AND ESTATE RETURNS WILL BE PROPERLY FILED. IF INCOME IS NOT TIMELY DISTRIBUTED, THE TRUSTEE HURTS THE TRUST BY PLACING IT IN A HIGH TAX BRACKET. TRUST INCOME EASILY REACHES THE 38% TAX BRACKET AND THE TAX CAN BE AVOIDED IF YOU CONSULT MY OFFICE AND A CPA RIGHT AWAY.

SPECIAL NEEDS CHILDREN AND ADULTS WITH DISABILITIES. For children with special needs, be sure to do the following: 1. Apply for social security disability, but see me first with regard to denials and appeals. 2. Be certain the school district annually issues it’s IEP after a complete exam. 3. After each IEP is complete, call 866-754-3398 to arrange a yearly Person Centered Plan from the Macomb/Oakland Regional Center. 4. Be certain to meet with me to create a special needs trust and a power of attorney. And 5. Be sure to apply for social security at least one month BEFORE the child’s 18th birthday.