Top 3 Tips from an Ann Arbor Estate Planning Attorney

An estate plan should be specifically tailored to your situation and needs. However, there are a few tips that can apply in all circumstances. By keeping the following three estate planning tips in mind, you can avoid some common pitfalls and have peace of mind knowing that your wishes will be carried out in the future. A skilled Ann Arbor estate planning attorney can help you put these tips into practice and make sure your plan works as you intend.

Tip #1: Check Your Beneficiary Designations on All Your Accounts

One of the most important estate planning tips is to check your beneficiary designations. A comprehensive estate plan goes beyond drafting a will and a trust. Beneficiary designations on bank, investment, and retirement accounts, as well as life insurance policies, are an essential part of estate planning. Accounts with beneficiary designations are often referred to as payable on death (POD) accounts or transfer on death (TOD) accounts.

These designations instruct the bank or financial institution how to distribute an account holder’s assets upon death, allowing the assets to pass directly to the named beneficiary. Using beneficiary designations on accounts and policies avoids probate administration since the transfer of assets is based on the contract you have with the bank or financial institution.

In addition to avoiding probate, beneficiary designations on accounts are a quick and cost-effective way of transferring assets upon death. Upon the death of the account or policy holder, the named beneficiary provides documentation of his or her identity along with the account holder’s death certificate to the financial institution to receive their direct distribution.

Naming Successor Beneficiaries

Not only should a primary beneficiary be named, but it’s important to have a designated backup beneficiary also. Successor beneficiaries should be named on accounts to receive assets in the event the primary beneficiary predeceases the account holder. In addition, following any major changes in life, such as deaths, births, marriages, and divorces, you should always review your primary and successor beneficiaries for any updates that may be needed.

Naming a Trust as the Beneficiary

An estate planning tip that is often overlooked is naming a trust as a beneficiary. In cases where there are concerns about releasing a substantial amount of assets to a person at one time, it may be advisable to name a trust as a beneficiary on the account. In such a case, upon the death of the account holder, the assets of the account are made payable to the trust. The trust would then be able to distribute assets to a beneficiary of the trust over a given time period or at a specific age. Typically, using a trust as the beneficiary named on an account is preferable when a beneficiary is a minor, young adult, or someone who is not financially responsible.

Tip #2: Consider a Lady Bird Deed for Your Real Estate

Naming beneficiaries on bank, investment, and retirement accounts, as well as life insurance policies, is an efficient and cost-effective estate planning tool that avoids probate administration for your assets. But you might also be wondering how you can avoid probate for your real estate.

In these cases, an essential estate planning tip is to create a lady bird deed. Also called an enhanced life estate deed, a lady bird deed is a popular estate planning tool that avoids probate for your home and other real estate. It automatically transfers the property at your death. With a lady bird deed, a property owner maintains total control over the property during their lifetime with the power to sell, mortgage, lease, or transfer all or any portion of the property.

However, if the property is still titled in the owner’s name at the time of their death, it automatically passes directly to the person or persons named in the deed. Although multiple people can be named in a lady bird deed, there are issues to consider regarding the transfer of property and discuss with an Ann Arbor estate planning attorney. Nevertheless, these types of deeds are used by both individuals and married couples as a cost-effective estate planning tool for transferring their home and other real estate without going through probate.

Tax Benefits of a Lady Bird Deed

A properly-drafted lady bird deed may also provide tax benefits for the person named in the deed who takes ownership of the property. For example, at the transfer of property following the owner’s death, the tax basis of the property increases to the value at death. This step up in tax basis can save a substantial amount of capital gains tax.

Additionally, a lady bird transfer of a family home or other real estate to certain family members, including children, siblings, and parents, will avoid the uncapping of property taxes if the transfer is made in accordance with Michigan’s exemption provisions.

A Lady Bird Deed Can Avoid Medicaid Recovery on Real Estate

Many people seek estate planning tips on how to avoid Medicaid recovery on real estate. This is another benefit of a lady bird deed. Under the current Medicaid Recovery Law, the State of Michigan is able to obtain reimbursement of past Medicaid payments from a recipient’s assets in their probate estate. Because a lady bird deed avoids probate administration for the real estate, there are no Medicaid reimbursement claims that can be made on the property. For individuals who may have the potential for Medicaid coverage of medical or long-term care, a lady bird deed provides protections for the transfer of their home to family members and loved ones.

In some situations, a lady bird deed may not be the best or most flexible option for addressing concerns that arise in transferring real estate after death. Before you decide that a lady bird deed transfer is right for you, it is important to consult with an estate planning attorney with real estate experience.

Tip #3: Inform the Fiduciaries You Appointed in Your Durable Power of Attorney and Patient Advocate Designation About Their Responsibilities

A critical part of estate planning is choosing the right person to act on your behalf if you are unable to make decisions. This includes appointing a trusted person to make financial and property decisions as your “agent” under a Durable Power of Attorney and appointing a trusted person to make medical decisions as your Patient Advocate.

These persons, referred to as your “fiduciaries,” are obligated under Michigan law to act with undivided loyalty, put your best interests above their own and follow the instructions you give them regarding your property and medical care. Remember that the persons you appoint in your estate planning documents play a vital role in carrying out your wishes and protecting your best interests during times when you are incapacitated by an accident or illness.

Not everyone might want the responsibility that comes with being a fiduciary or be able to serve in the role. One of the most crucial estate planning tips is to confirm that your fiduciaries accept and understand the responsibilities that come with their appointment. Responsibilities include managing finances and investments, as well as making medical and life-sustaining care decisions. You should discuss your instructions and expectations with the persons you name before an emergency arises so they are comfortable acting on your behalf. Copies of the relevant documents should also be given to your fiduciaries so they will be ready to effectively carry out their duties when the need occurs.

Schedule a Free No Obligation Consultation with Ann Arbor Estate Planning Attorney Bill Ager

It’s essential to have the proper legal guidance when creating an estate plan. In my practice at Ager Law Office, I help individuals and families with their estate planning needs as well as real estate needs, including Wills, Trusts, Durable Powers of Attorney, Patient Advocate Designations, and Lady Bird Deeds. From my Ann Arbor office, I serve clients throughout Washtenaw County.

To talk with an Ann Arbor estate planning attorney about more estate planning tips, create a customized estate plan, or update your current plan, schedule a free consultation. Call (734) 649-0784, send an email to bill@agerlawoffice.com, or use the online contact form on this website.