ESTATE PLANNING
While most people are well aware of the use of wills as an estate planning tool, here is a list of other common and very useful tools used in estate planning:
A living trust, executed by a "Grantor," is designed to accomplish several objectives: (1) to avoid the need to take assets of the Grantor through probate after he/she dies, (2) to safeguard the assets during periods where a person is incapacitated, and (3) to provide for the distribution of the Grantor's assets according to his/her wishes, including the possible disribution to minor children when they reach specified ages [e.g. 1/3 @ 25 years, 1/3 @ 30 years, and 1/3 @ 35 years of age]
An irrevocable trust can be used to protect assets from creditors, to allow a parent or grandparent to give assets for the benefit of a child or grandchild, without allowing the child or grandchild unlimited access to those gifts.
Ordinarily, life insurance proceeds are included in your estate when you die, thus subjecting the proceeds to a tax of up to 55%. By putting the policy in a life insurance trust, this can be avoided.
Rather than giving assets outright to charity, you may want to set up a charitable trust, which gives your children income for a specified period of time, and after the time expires, what remains is distributed to charity. This type of trust allows you to give highly appreciated assets to a trust, which can then sell the assets without capital gains, thus allowing you to diversify a portfolio without the fear of being taxed on all of the appreciation.
Giving (or leaving) assets to a handicapped child could make them ineligible for state and federal benefits such as Social Security (SSI) or Medicaid. Rather than giving assets to the child, consider giving (or leaving) the assets to a special needs trust, which the child can use for his or her benefit, while ensuring the continued eligibility of state and federal benefits.
For those who are above the estate tax limit (presently $1,000,000), many clients can benefit from giving their homes, or cottages, to their children through the use of a Personal Residence Trust. The client gets to use the home or cottage for a specified number of years, and the home or cottage is NOT considered as part of the client's estate when she dies. The result is that the appreciation of that home or cottage does not increase the value of the client's estate. Rather the appreciation increases the value of the assets left to the children.
DURABLE POWER OF ATTORNEY
(MCLA §§ 700.5501 through 700.5520)
A durable power of attorney is a power of attorney by which a principal designates another as the principal's attorney in fact in writing. The writing must contain the words "This power of attorney is not affected by the principal's subsequent disability or incapacity, or by the lapse of time", or "This power of attorney is effective upon the disability or incapacity of the principal", or similar words showing the principal's intent that the authority conferred is exercisable notwithstanding the principal's subsequent disability or incapacity.
Acts done by an attorney in fact under a durable power of attorney during a period of disability or incapacity of the principal have the same effect and inure to the benefit of and bind the principal and the principal's successors in interest as if the principal were competent and not disabled. Unless the instrument states a termination time, the power is exercisable notwithstanding the lapse of time since the execution of the instrument.
If a court of the principal's domicile appoints a conservator, estate guardian, or other fiduciary charged with the management of all of the principal's property or all of his or her property except specified exclusions, the attorney in fact is accountable to the fiduciary as well as to the principal. The fiduciary has the same power to revoke or amend the power of attorney that the principal would have had if he or she were not disabled or incapacitated.
A principal may nominate the conservator, guardian of his or her estate, or guardian of his or her person for consideration by the court if a protective proceeding for the principal's person or estate is commenced after execution of the power of attorney. The court shall make its appointment in accordance with the principal's most recent nomination in a durable power of attorney except for good cause or disqualification. The death of a principal who has executed a written power of attorney, durable or otherwise, does not revoke or terminate the agency as to the attorney in fact or other person who, without actual knowledge of the principal's death, acts in good faith under the power.
The disability or incapacity of a principal who has previously executed a written power of attorney that is not a durable power does not revoke or terminate the agency as to the attorney in fact or other person who, without actual knowledge of the principal's disability or incapacity, acts in good faith under the power.
If an attorney in fact acts in good faith reliance on a power of attorney, durable or otherwise, and executes a sworn statement stating that, at the time of the action, the attorney in fact did not have actual knowledge of the principal's death, disability, or incapacity or of the power's termination by revocation, the sworn statement is, in the absence of fraud, conclusive proof of the power's non-termination or non-revocation.
Health Care Power of Attorney
DESIGNATION OF PATIENT ADVOCATE
(MCLA §§ 700.5501 through 700.5520)
An individual 18 years of age or older who is of sound mind at the time the designation is made may designate in writing another individual who is 18 years of age or older to exercise powers concerning care, custody, and medical treatment decisions for the individual making the designation.
The designation must be in writing, voluntarily signed, witnessed and made part of the patient's medical record with the patient's attending physician and, with the facility where the patient is located. The designation must include a statement that the authority conferred is exercisable only when the patient is unable to participate in medical treatment decisions.
The designation must be executed in the presence of and signed by 2 witnesses. A witness may not be the patient's spouse, parent, child, grandchild, sibling, presumptive heir, known devisee at the time of the witnessing, physician, or patient advocate or an employee of a life or health insurance provider for the patient, of a health facility that is treating the patient, or of a home for the aged where the patient resides.
A witness must not sign the designation unless the patient appears to be of sound mind and under no duress, fraud, or undue influence.
A patient may designate in the designation a successor individual as a patient advocate who may exercise powers concerning care, custody, and medical treatment decisions for the patient if the first individual named as patient advocate does not accept, is incapacitated, resigns, or is removed.
Before acting as a patient advocate, the proposed patient advocate must sign an acceptance of the designation.
The authority under a patient advocate designation is exercisable by a patient advocate only when the patient is unable to participate in medical treatment decisions. The patient's attending physician and another physician or licensed psychologist shall determine upon examination of the patient when the patient is unable to participate in medical treatment decisions, shall put the determination in writing, shall make the determination part of the patient's medical record, and shall review the determination not less than annually.
A patient advocate designation is revoked by any of the following:
Even if the patient is unable to participate in medical treatment decisions, a patient may revoke a designation at any time and in any manner by which he or she is able to communicate an intent to revoke the designation.
A subsequent designation that revokes the prior designation either expressly or by inconsistency.
If a designation is executed during a patient's marriage naming the patient's spouse as the patient advocate, the designation is suspended during the pendency of an action for separate maintenance, annulment, or divorce and is revoked upon the entry of a judgment of separate maintenance, annulment, or divorce, unless the patient has named a successor individual to serve as a patient advocate.
A patient advocate cannot make a medical treatment decision to withhold or withdraw treatment from a pregnant patient that would result in a pregnant patient's death.
A specific power of attorney can be used to allow an Agent to do one very specific thing, such as sell real estate, while you are away or unable to attend a closing.
POWER OF ATTORNEY:
CARE AND CUSTODY OF CHILD OR INCAPACITATED INDIVIDUAL
(MCLA § 700.5103)
A parent or guardian of a minor or a guardian of a legally incapacitated individual may delegate to another person, for a period not exceeding 6 months, any of the parent's or guardian's powers regarding care, custody, or property of the minor child or ward. This delegation may not include the power to consent to marriage or adoption of a minor ward or to release of a minor ward for adoption.
In addition, Michigan law now allows a parent to designate a guardian in the event that the parent dies or becomes incapacitated. Under the old law, you could only designate a guardian for your children in the event of your death.
UNIFORM ANATOMICAL GIFT LAW
(MCLA §§ 333.10101 through 333.10109)
An individual of sound mind and 18 years of age or more may give all or any physical part of the individual's body for any purpose specified in section 10103. An anatomical gift takes effect upon death.
A gift of all or a physical part of the body may be made by will. The gift becomes effective upon the death of the testator without waiting for probate. If the will is not probated, or if it is declared invalid for testamentary purposes, the gift, to the extent that it has been acted upon in good faith, is nevertheless valid and effective.
A gift of all or a physical part of the body may also be made by document other than a will. The gift becomes effective upon the death of the donor.
The document of gift, which may be a card designed to be carried on the person, shall be signed by the donor in the presence of 2 witnesses. The witnesses must sign the document in the donor's presence. If the donor cannot sign, the document of gift may be signed for the donor at his or her direction and in his or her presence in the presence of 2 witnesses who shall sign the document in the donor's presence.
Delivery of the document of gift during the donor's lifetime is not necessary to make the gift valid.
An anatomical gift may be made to a specified donee or without specifying a donee. If the will, card, or other document or executed copy thereof, has been delivered to a specified donee, the donor may amend or revoke the gift by any of the following methods:
Any document of gift which has not been delivered to the donee may be revoked by the donor as set out above or by destruction, cancellation, or mutilation of the document of gift and all executed copies of the document of gift.
Any gift made by a will may also be amended or revoked in the manner provided for amendment or revocation of wills, or as set out above.
For many of my clients, such as doctors and other lawyers, asset protection is a critical issue. I can provide advice regarding the proper use of insurance, re-titling of assets, foreign asset protection trusts, and other mechanisms, all with the goal of LEGALLY keeping those hard-earned assets away from creditors, judgment debtors, or divorce judgments.
Many of my clients are either on their second marriage or are planning for it. For those clients, the use of a prenuptial agreement can save them, and their children, a great deal of headache. Although commonly thought of as an anti-divorce mechanism, prenuptial and postnuptial agreements are also very useful as an estate planning tool, resolving many issues which arise when one spouse dies.