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Detroit Probate, Trust & Estate Administration Law Blog

What is a spendthrift trust?

You want to leave your assets to a family member or friend in trust, but frankly you do not trust they have the maturity to manage a large lump sum disbursed to them responsibly. You may be worried they will spend it recklessly on frivolous things, leaving them without the ability to care for themselves and their loved ones as the trust intended. When that situation arises, you may be advised to establish a spendthrift trust - but what is a spendthrift trust, and is it legal in Michigan?

Michigan legislature essentially defines a spendthrift trust as a limiter on the beneficiary, and yes, it is entirely legal. A spendthrift provision in an established trust lets you instruct the trustee on how to administer and disburse the trust to the beneficiary, based on established conditions. For example, you may instruct the assets in trust to be delivered as a monthly stipend intended to cover living expenses, or as an annual lump sum. You may even specify that the funds can only be used for specific purposes, such as education or home ownership.

Your postnuptial agreement can merge with your estate plan

Prenuptial agreements have become very popular in the past few years, but you and your spouse might not have had one. Instead, you may have created a postnuptial agreement.

You are now over a decade into your marriage and have been discussing the subject of an estate plan. Your postnup can become part of that, and it is good timing, as the agreement may need updating.

How to benefit charities after death

Philanthropists in Michigan who want to make significant charitable contributions upon their death may want to consider setting up a charitable trust. This type of estate planning can ensure money and other assets benefit particular charities, and there are also tax incentives associated with them.

According to the Chronicle, this trust is only considered charitable if it is set up as irrevocable. This means the trust cannot be changed and any assets provided to it may only be used by the non-profit beneficiaries. Depending on the situation, one of three types of charitable trusts may be set up. These include:

  • Charitable trust - the grantor deposits assets such as cash, real property, art, jewelry and securities, and the grantor can manage these assets through his or her lifetime. Income generated from the asset management is distributed to the chosen charities. The grantor should name someone to manage the trust upon death, as assets are not automatically transferred to beneficiaries. 
  • Charitable remainder trust - income generated from the assets is distributed to the grantor of the trust and upon his or her death the assets are transferred to the beneficiary
  • Pooled charitable trust - the trust is set up and managed by the nonprofit organization. Average people can put cash or property into the trust, and income generated from the assets is given back to the grantors.

Naming a new executor after your divorce

With the end of marriage, your life could change in many different ways. For example, the amount of time you are able to spend with your children may differ, or you could face financial issues as a result of child support, alimony, or adjusting to life without your spouse. However, splitting up with a marital partner can also affect your estate plan, of course. Typically, a divorce will revoke a spouse’s appointment as the executor of an estate. Once your divorce has finalized, you may be looking over the different ways your life has changed and trying to move forward. For example, you may be trying to decide who to name as the new executor of your estate.

Often, it is easy for married couples to name their spouse as the executor of their estate. After all, they are probably very close to each other and capable of understanding the scope of the entire situation. Once a marriage ends, it can be challenging to decide who should replace a former spouse as the executor. There are many factors to consider and it is imperative for you to name someone who understands their responsibilities and is capable of carrying out their duties properly. For some people, a child is a suitable candidate, while others may name someone else as the executor.

A look at the breach of fiduciary duties

When it comes to the probate process, there are a wide variety of challenges that people on all sides may encounter. For example, a beneficiary may not believe that their loved one's estate plan was distributed according to his or her wishes, while an executor may struggle with all sorts of different legal issues. However, the breach of fiduciary duties is often an especially tough issue for beneficiaries and executors alike. If you are in this position, you should go over the ins and outs of your circumstances from a legal perspective and know your rights.

Whether you are a beneficiary who is convinced that the executor failed to live up to his or her duties, or you are an executor who has been falsely accused of such wrongdoing, it is pivotal to take a close look at your different options before moving forward. Sometimes, these disputes can be particularly challenging when they involve family members. For example, two siblings may disagree on how an estate is handled, one being the executor and one being a beneficiary. Unfortunately, when these disputes are not handled efficiently, strain can be placed on the whole family, which can make life even more difficult for a family that is facing intense emotional pain following the loss of someone they loved.

Alzheimer's and financial planning

The majority of Michigan residents understand the importance of having a will so there is no question what happens to assets once the writer of the will passes away. These days, the aging population needs to consider a more complicated financial plan, and this is one that deals with the potential of developing Alzheimer's or some other form of dementia. It is a condition that is becoming more common and it is important for family members to discuss some of the difficult topics surrounding it.

According to FindLaw, it can be challenging to make health-related, legal and financial decisions once the person is in late-stage Alzheimer's so it is important to begin having the discussion even before a diagnosis is made. If an individual has been diagnosed but is still mentally competent, a durable power of attorney is a good option. Once the individual is no longer competent, a legal guardianship would be named if there is no power of attorney.

Providing for a blended family with a proper estate plan

A happy blended family is one that is blended on several levels: physically, mentally, emotionally and financially. An estate plan can be very helpful with the financial aspect.

A successful plan clearly designates the distribution of the estate. For those with newly blended families, or those who are creating an estate plan for the first time, there are a few key aspects to consider.

What is a constructive trust?

Many Michigan residents are familiar with a trust in regard to estate planning. However, fewer know about constructive trusts, which have a completely different purpose than regular trusts do. A constructive trust is court-ordered when someone obtained the property of someone else in a wrongful way.

According to FindLaw, a constructive trust does not actually exist in a concrete manner and is commonly referred to as a "legal fiction." This is because it is missing the legal framework, such as the presence of a trustee, other types of trusts have. When something is illegally obtained, the court can order a constructive trust to get the defendant to repay any profit that was garnered in the obtained interest or property title.

Benefits and risks of long-term care insurance

As Michigan residents grow older, they need to consider a variety of things so they and their family are protected. This includes writing a will, deciding if a trust is beneficial and naming beneficiaries and guardians. 

Another consideration is long-term care insurance. According to AARP, this helps pay for a number of services and care in the event an illness or injury calls for daily assistance for a long period of time. While there are some benefits to this coverage, it is not necessarily for everyone.

What if you die without a will?

No one wants to think of their passing, but residents of Michigan should take the time and effort to make a plan regarding what to do with their assets when they die. If someone dies without a will, the state is in charge of distribution, and there is a progression of who the assets are passed to. To avoid complications or legal battles among intended heirs, it is always a good idea to have a legal document detailing how your assets should be allocated.

According to FindLaw, if you do not have a will your property will be distributed according to Michigan's laws of intestate succession. Property includes real estate and vehicles as well as securities, bank accounts and other items of value. The beneficiaries the state chooses largely depends on marital status and if there are children. Typical heirs who the state will name include:

  • Surviving spouse
  • Blood or adopted children
  • Siblings
  • Parents
  • Aunts and uncles
  • Distant relatives

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