You don't need a multi-million dollar estate to benefit from estate planning. Estate planning is planning for the transfer of your money and property after your death. Either a will or a trust can accomplish this, depending on your goals. Estate planning also includes life documents that provide for you even when you can't make medical or financial decisions.WHY SHOULD I HAVE AN ESTATE PLAN?
Estate planning allows you, while you are living, to decide where your money and property will go after your death. And, depending on your financial situation, it can also save your heirs and beneficiaries money when it comes time to probate your estate.
WILLS AND TRUSTS
A will distributes your property after your death to the people you designate. With a will you can:
- Appoint guardians for your minor children
- Disinherit heirs
- Make gifts to friends, caregivers, or charities
- Establish a trust to hold and manage funds for children or pets
However, a will has drawbacks:
- Any property left to a beneficiary in a will is subject to the costly and time-consuming probate process
- Wills can be contested by the decedent's family
- A will is a public document, so anyone can see your will after your death
Though a will is not an expensive document to create, it has to be probated. The probate court in Michigan charges fees depending on the size of the estate according to MCL 600.871(1). The Kalamazoo County Probate Court provides an easy inventory calculator that calculates this fee for you.
However, in addition to the inventory fee collected by the court, the probate process can also incur appraisal costs, executor’s fees, and legal fees. One rule of thumb is to estimate the cost of probate at about 5% of the decedent's estate.
So, though a will cuts costs in the short run, it does not avoid probate, and may actually cost the estate more in the long run. A trust, though more time-consuming to create, avoids the probate process altogether.
A trust also distributes your property after your death similarly to a will. You can also name guardians for your children like in a will. However, a trust has some advantages over a will:
- Trusts avoid the expensive and lengthy probate process
- Trusts are private, so only the beneficiaries have the right to see how you divided your assets
- Trusts can distribute property to beneficiaries over time rather than distributing them outright
- Trusts, especially living trusts (a trust made during your lifetime), are less likely to be contested
On the other hand, trusts also have some drawbacks:
- Trusts are more costly to create
- Clients have less control over their assets (title to assets are changed to be in the name of the trust)
- Probate may still be necessary if you forget to title property in the name of the trust
I can help you decide whether a will or trust is right for you.
There are also three life documents that provide for your needs in the event you cannot make medical or financial decisions. A Durable Health Care Power of Attorney ensures that your medical wishes are followed in case your cannot make these decisions yourself. A Durable Financial Power of Attorney allows you to elect someone to help you manage your property and financial affairs if you become unable to do so. Finally,a HIPAA Release ensures that your designee has access to your medical information, which your health care provider could otherwise refuse to release.
These documents are essential to any estate plan, even for married couples. I can draft life documents that reflect your wishes.