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Detroit Probate, Trust & Estate Administration Law Blog

4 factors that can affect an entrepreneur's estate plan

As a business owner in Michigan, you no doubt understand the importance of having estate planning documents in place to ensure that probate and taxes do not diminish your hard work. Our legal team at the Bingham Legal Group often works with entrepreneurs to ensure that their assets are protected.

While individuals often go several years without updating end-of-life documents, Forbes magazine notes that entrepreneurs should revisit their estate plans more frequently. The following four reasons may make your estate plan less successful.

What happens to a house when the owner dies

It may bring peace of mind to heirs to know that they will not be saddled with their parent's debt in Michigan. However, someone who is looking forward to inheriting a home that was promised in the will could discover that the transaction is not straightforward.

According to Business Insider, during the probate process, the executor of the will or the administrator appointed by the probate court must identify assets and debts, and use assets to pay off the debts. If the deceased had many debts, and there is not enough money in accounts to pay them, the house may have to be sold to cover them. 

Should I agree to become a trustee?

The responsibility of trust administration in Michigan involves quite a few financial duties, and if someone has asked you to be a trustee, you should consider it carefully before agreeing. The American Bar Association explains that your role depends heavily on instructions in the trust, so you should discuss the specifics of issues such as investments and distributions with the trustor to learn what the appointment will entail.

Having a lack of experience in investing does not necessarily mean you should turn down the job if you are otherwise willing to accept it. Many fiduciaries rely on professional advice to guide them in how to handle the assets based on the terms and goals of the trust, as well as the following:

  • What the state's prudent investor rules are
  • Which assets to invest
  • How to invest them
  • What steps to take to minimize taxes

What you should know about testamentary trusts

You may already be familiar with some of the estate planning options available to you in Michigan, such as wills and trusts. Many people rely on the team at the Bingham Legal Group to explain the differences in the roles, and which option may be better in a given situation. However, there is a type of trust that is actually included in the will.

FindLaw explains that, rather than being set up while you are still alive as a revocable or irrevocable trust would be, a testamentary trust comes into being after your death. The instructions are included as a provision of your will. Your assets go through the probate process, which involves the executor you named inventorying your estate and paying off debts, taxes and fees. Then, with the assets that are left, a trust is set up for your beneficiaries. 

Is probate always necessary?

The personal representative of your deceased spouse is responsible for administering the Michigan estate. However, there are many assets that may pass on to you that do not require the PR's involvement. 

According to the State Bar of Michigan, if you are named as beneficiary on a life insurance policy, IRA or pension, for example, those assets would go directly to you and bypass probate. If you and the decedent jointly owned properties and your name is on the deed, title or account, those would still be your assets, so probate would be unnecessary in this case, too. Any properties that are included in a trust would be administered by a trustee, rather than becoming the responsibility of the PR. 

Important estate planning factors for new parents

Though a will can be beneficial after your passing, it may not cover all the areas of your estate. A proper estate plan can help you to take care of your loved ones even after you are gone.

For new parents, this can be especially critical. If you are forming a new estate plan or looking to revise your current one, there are a few things to consider as a new parent.

Should I choose an individual or an institution as trustee?

When you are setting up a trust, one of the components is designating a trustee. The trustee has significant responsibility, so it is important to find just the right person. Or should you choose an institution instead? According to the American Bar Association, both trustee options have benefits, but they each also come with downsides.

The duties of your trustee boil down to managing the money you are leaving to your beneficiaries. This typically includes the following:

  • Collecting assets of the estate
  • Making investments
  • Paying bills
  • Filing accountings
  • Consulting with beneficiaries

The powers of attorney pertinent to your estate plan

True to its nature, a crisis often occurs when you least expect it. For example, your mom calls you in the wee hours to say that your father has had a stroke and is in the hospital. This seems unbelievable: Your folks came over for dinner last night, and your dad looked and acted just fine.

Fortunately, your father assigned power of attorney to you when he updated his will last month. As you get ready to drive to the hospital, you cannot help thinking about what that responsibility entails.

A holographic will could be easier to challenge

In Michigan, a person who is concerned about who receives certain assets after his or her death does not have to type out or download a document and find a couple of people to witness its signing. Instead, a pen and piece of paper are all that are needed to ensure that his or her wishes are honored.

According to the Michigan Legislature, if the will is handwritten, signed and dated by the testator, it is valid. In some cases, some of the document could be written by someone else, but the material portions must match the signature of the testator. When there are portions written by someone else, these could be used as external evidence that the document was intended to be a will by the testator.

Fiduciary duties and will contests

Unfortunately, all sorts of problems can arise with regard to a person's estate after they pass away, such as disagreements with the way in which assets are distributed or tax issues. Sometimes, a will contest may arise over allegations that an executor breached his or her fiduciary duties. The Bingham Legal Group knows how hard this can be for executors, beneficiaries, and entire families in Michigan. When these disagreements arise, it is vital to carefully go over the ins and outs of the situation as you move forward.

If you are an executor, it can be very difficult to be accused of breaching your fiduciary duties, especially if you are innocent. On the other hand, you might be a beneficiary who believes that assets from your loved one's estate were not distributed according to their wishes. Regardless of which side you are on, you should do what you can to work towards a peaceful solution. Sadly, these disputes can break up families and may also generate a great deal of stress, which can be particularly troubling for those who have a lot of emotional pain following the death of their loved one.

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