Month: May 2011

The Downside to Joint Account Ownership

May 29, 2011 /

As a Michigan estate planning attorney, I regularly see families that own much (if not all) of their property jointly.  Joint tenancy involves both (or multiple) people having full ownership of the asset.  I see it most commonly with homes, bank accounts and non-retirement investment accounts.

Now don’t get me wrong, there are situations where owning something jointly is just fine.  However, I regularly see it as a replacement for proper estate planning (for example, putting children on your accounts as joint owners).  That is a very bad thing.  Why?  We’ll cover that in a second, but first lets think about why people own property jointly.

Many people consider it easy.  Well, I can’t argue with that.  It is easy.  You just put the names of all the owners on the document(s) proving ownership.  Some consider it a gesture of love.  After all, the idea of jointly owning something seems to have a “love” or “trust” connotation.  “I love you enough that I’m giving us both full right to this.”  Very common in a marriage (traditional or otherwise).  Finally, some people know that jointly owned property bypasses the probate court process when the first joint owner dies.  That’s true.

Yet each of those “pluses” comes with a whole host of “minuses.”  Here’s a look at some examples:

  • No control – you have given up some control while alive and a lot of control if you become incapacitated or pass away.  Ultimately, what you have may pass to people you would have never wanted to receive it.
  • Probate.  Yes, jointly owned property bypasses the probate process, but that only delays it . . . it does not avoid it.
  • For unmarried individuals, there could be unintentional estate or gift taxes.
  • Loss of planning opportunities now and down the road.
  • It is available to the other person’s creditors and you lose asset protection possibilities when you pass away.

As with all planning, each family situation is unique.  If you jointly own property with someone else, don’t you think you owe it to yourself and your family to find out what would happen and how you can make sure your wishes are followed?  Call us at 616-827-7596 to schedule a Peace of Mind Planning Session and have your questions answered.

Michael Lichterman is an estate planning and business planning attorney who helps families and business owners create a lasting legacy by planning for their Whole Family Wealth™.  This goes beyond merely planning for finances – it’s about who your are and what’s important to you.  He focuses on estate and asset protection planning for  the “experienced” generation, the “sandwich generation” (caring for parents and children), doctors/physicians, nurses, lawyers, dentists, professionals with minor children, family owned businesses and pet planning.  He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients – many of which have become great friends.

Non-Tax Reasons for Estate Planning

May 22, 2011 /

If you read this previous post, you know that I’ve had several recent conversations with families and other professionals that think estate planning is “dead” due to the increase in the estate tax exemption.  Those conversations have continued, which prompted this follow up post.

It’s true that many families believe that estate planning is all about minimizing taxes and distributing your “assets” to the next generation.  I believe that approach places the emphasis on the wrong considerations.  Sure, minimizing taxes and distributing assets are considerations for estate planning, but without a bigger context they will lead to an estate plan that is not much more than a form document.

The emphasis should be on creating a legacy for your family.  No, that doesn’t mean you have to be a gazillionaire . . . it means that you create your plan in a way that will benefit those you want and do so in a way that shares your values, insights, stories and experiences with them and others.  It can even make them better people (or encourage them to stay a “good person” if they already are).

Think about it this way . . . which of these concerns you more:

  • Your family loses 35% of the value of your estate that is over $5 million (if at all) -or- that 50% of the legacy you pass on to them is lost in a divorce?
  • Your young children (or grandchildren) receive less money for their care -or- that they are cared for by someone you would never want raising them?
  • Your child with special needs is disqualified from government benefits -or- that they never reach their full potential because they are limited to government benefits and limited supplementary services?
  • That there is a tax owed when your family business goes to your children -or- that your children fight over who runs the business or hold a grudge because they didn’t want anything to do with the business and are stuck with it anyway

See the difference?  The focus should be on the personal considerations and the legacy that will be passed on . . . taxes can almost always be handled.

Ready to have a plan that is based on who you are and what’s important to you?  Contact us at 616-827-7596 to schedule your Peace of Mind Planning Session.

Michael Lichterman is an estate planning and business planning attorney who helps families and business owners create a lasting legacy by planning for their Whole Family Wealth™.  This goes beyond merely planning for finances – it’s about who your are and what’s important to you.  He focuses on estate and asset protection planning for  the “experienced” generation, the “sandwich generation” (caring for parents and children), doctors/physicians, nurses, lawyers, dentists, professionals with minor children, family owned businesses and pet planning.  He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients – many of which have become great friends.

Having Your Say in Your Michigan Estate Plan

May 15, 2011 /

You’ve probably heard about the unique estate planning of Saginaw, MI resident Wellington R. Burt.  If not, you can read an article about it here. Mr. Burt was very well off, under any definition, but that is not what makes his story interesting.  What makes his story interesting is how he used estate planning to accomplish specific goals for reasons important to him.

What did he do?  He made sure that his fortune would bypass his children and grandchildren.  Instead it would be distributed to his living heirs 21 years after the death of his youngest grandchild living at the time that he passed away.

I’ve heard many conversations about this case, both in person and online, many of which are demonizing Mr. Burt for “not caring for his family” or being an “old curmudgeon.”   What many people don’t realize is that estate planning is all about your goals, desires and wishes, not those of others.  And I believe that more families would have unique plans like Mr. Burt’s (ok, maybe not totally skipping 2 generations) if they only knew it was possible.  That’s why it’s important to work with an estate planning attorney who gets to know you, your family, your wishes and desires, and counsels you through various planning approaches based on what’s important to you . . . not what fits in the attorney’s standard form!

Think about it.  Warren Buffett – he has publicly said that his family will receive only a small portion of his estate, the vast majority of which will go to charity.  Bill and Melinda Gates have expressed the same plan.  Sure, even a portion of those estates is a large amount of money, but nowhere near what they could have received.

And this is not uncommon among “normal” folks like you and me.  Why?  Because each family is unique and each plan should match the family in uniqueness.  For example, some parents will “disinherit” a child who is a physician or business owner.  Most folks have a very negative reaction to that . . . but the reason was that the child made enough money and didn’t need any more.  In fact, the child was in favor of being skipped, because a sibling was much more in need.

So maybe your wishes, values and goals don’t call for disinheriting two generations of your family like Mr. Burt’s.  However, I encourage you to think of the sky as the limit, no goal is off the table, when you do your planning.  That way you can have the peace of mind and comfort of knowing you have truly created a lasting legacy.

Oh yeah . . . one more thing.  This story points out an “unsung” benefit of using trusts in your planning.  In large part we know about Mr. Burt’s story because he used a Will.  A Will goes through the probate process and guess what?  That process is public.  By planning with a fully funded living trust (or other types of trusts) you can maintain your family’s privacy.

Wondering how YOUR family can have an estate plan based on who you are and what’s most important to you?  Give us a call at 616-827-7596 to schedule a Peace of Mind Planning Session and find out.  Mention this blog post and we’ll waive the Planning Session fee (a $750 value!)

Michael Lichterman is an estate planning and business planning attorney who helps families and business owners create a lasting legacy by planning for their Whole Family Wealth™.  This goes beyond merely planning for finances – it’s about who your are and what’s important to you.  He focuses on estate and asset protection planning for  the “experienced” generation, the “sandwich generation” (caring for parents and children), doctors/physicians, nurses, lawyers, dentists, professionals with minor children, family owned businesses, cottage planning and pet planning.  He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients – many of which have become great friends.

Your Michigan Family Cottage and Estate Planning

May 8, 2011 /

From the small cabin in the woods to the multi-million dollar cottages on Lake Michigan, many Michigan families have a “home away from home.”  Maybe it’s a cottage, maybe it’s a second home.  In either case, it is a place filled with memories, stories and important family moments.  As a Grand Rapids, Michigan estate planning and cottage succession planning attorney, it is no surprise to me that many cottage owners want to ensure that the “family cottage” stays in the family for as long as possible.  They want to make sure future generations have the same opportunity for family bonding and memories that they’ve had.

And yet many Michigan cottage owners do the complete opposite of what it necessary to reach this goal.  Many assume that “it will work itself out.”  Or they figure that “all my kids get along and they know that I want to keep it in the family as long as possible . . . I trust them to take care of it.”  In my experience, relying on things to “work themselves out” virtually guarantees that they won’t.

Cottage planning is not putting your children’s names on the deed to the property or letting your foundational estate plan handle the distribution.  Cottage planning is much more . . . and rightly so given the number of family members who can ultimately benefit from it.

The goal of cottage planning is to create a legal structure that will help ensure the cottage stays in the family for generations to come . . . rather than leaving it to chance.  A proper cottage succession plan is created with a unique blend of estate planning, business planning and real estate law.  If done correctly, it can even protect the cottage from creditors, lawsuits and divorce among the future generations.  Truly creating a legacy that you can be proud of.

In future posts I will delve into some of the cottage planning strategies that work.  In the meantime, call us at 616-827-7596 if you want to make sure that the “handing down” of your cottage isn’t left to chance.

Michael Lichterman is an estate planning and business planning attorney who helps families and business owners create a lasting legacy by planning for their Whole Family Wealth™.  This goes beyond merely planning for finances – it’s about who your are and what’s important to you.  He focuses on estate and asset protection planning for  the “experienced” generation, the “sandwich generation” (caring for parents and children), doctors/physicians, nurses, lawyers, dentists, professionals with minor children, family owned businesses, cottage planning and pet planning.  He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients – many of which have become great friends.

 

Protecting the Cash Value of Life Insurance in Michigan

May 1, 2011 /

If you read my previous, you know that the cash value of life insurance may not be protected from creditors in Michigan – it is still questionable.  As a Michigan estate planning attorney, I’ve seen the disappointment on some faces when I explain the current state of affairs.  Then they ask the logical question . . . “well, is there any way that I can protect it for sure?”

The answer is yes!  Although there may be other ways, one good way to protect the cash value of life insurance in Michigan is by having the insurance in an Irrevocable Life Insurance Trust – many times referred to as an ILIT.

In simple terms, an ILIT is an irrevocable trust that is the owner of one or more life insurance policies.  Although it may go without saying, because it is irrevocable it cannot be revoked or amended.  A an additional key component is that the person whose life is insured cannot retain any “incidents of ownership.”  Although not comprehensive, a good overview of “incidents of ownership” can be found here.  Because you do not “own” the insurance, it is not available to creditors . . . that is what protects it.

Please note that an ILIT is an advanced estate planning technique and is rather intricate in its creation and operation.  Run, don’t walk, away from any attorney who say they are “simple” or a “piece of cake”, or those that don’t ask you very many questions before drafting it.

What you read above is an enormous simplification of how ILITs work.  Do NOT try to draft or implement an ILIT on your own.  Make sure to work with a dedicated estate planning attorney that is familiar with ILITs and their intricacies.  Otherwise you will spend your money on something that won’t do much for you.

Call us at 616-827-7596 to determine if an ILIT can protect the cash value of your life insurance.

Michael Lichterman is an estate planning and business planning attorney who helps families and business owners create a lasting legacy by planning for their Whole Family Wealth™.  This goes beyond merely planning for finances – it’s about who your are and what’s important to you.  He focuses on estate and asset protection planning for  the “experienced” generation, the “sandwich generation” (caring for parents and children), doctors/physicians, nurses, lawyers, dentists, professionals with minor children, family owned businesses and pet planning.  He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients – many of which have become great friends.