Making Another Person Joint On Your Bank Account is NOT Good Estate Planning

I received a call the other day from a client who had made her bank account joint with her daughter so that her daughter could access the account on her behalf if needed. My client has a revocable living trust and a durable power of attorney, but choose not to use them for this account for some reason. Now, the daughter is getting divorced and the attorney for the daughter’s husband is claiming that this bank account is marital property and, therefore, part of the divorce settlement. I advised my client to hire an attorney to assist her in proving that the money in the bank account was hers alone and her daughter had never made any deposits or withdrawals to the account.

A better way to handle this bank account would be to retitle the account in the name of the client’s revocable living trust and name her daughter as power of attorney. That way, the daughter is not considered an owner of the account but can access the funds on her mother’s behalf if needed. By titling the account in the trust, the account avoids probate administration up the client’s subsequent demise. Another option would be to keep the bank account in the client’s name alone, name the daughter as power of attorney, and name a transfer on death (TOD) to be the trust or another beneficiary. This would also avoid probate administration. Banks have TOD and power of attorney designations that can be filled out at the bank for people who don’t have trusts or power of attorney documents.

A few years ago, another client had made his son joint on his bank account and a creditor of the son froze the account. Again, the client had to hire an attorney to get it straightened out, which was costly, and he didn’t have the use of the funds until the account was later unfrozen.

These are just two of the many unintended consequences that can occur when you place another person’s name on an asset of yours. Putting another person on the deed to your home can cause capital gains taxes for the other person, along with the same creditor problems mentioned above.

This is why I encourage people to do proper planning, to protect both yourself and your heirs. If you would like to discuss estate planning options, please call to schedule a conference.

If you have any questions, please call Karen L. Stewart, Attorney and Counselor at (248) 735-0900.

For more information, please see my website, www.customestateplans.com.

Will I Get Stuck With Family Member’s Debt After They Die?

I often get asked by beneficiaries of a deceased family member’s estate if they are personally responsible for paying off the family member’s debt. The answer is generally “no” but it depends upon the debt and how connected you are to the family member’s finances.

As a general rule, the assets in a deceased person’s estate must first go toward paying off the person’s debts before the beneficiaries receive any inheritance. A mortgage on a house may force the sale of the house unless there are other assets in the estate to pay off the mortgage or a beneficiary who wants the house as part of his or her share of the estate is able to pay off or refinance the mortgage. If the assets in the estate are not sufficient to pay off the debts, the beneficiaries are not personally responsible to make up the shortfall. Instead, the creditors usually will have to eat the shortfall.

Assets that pass by beneficiary designation to an individual, such as life insurance and retirement benefits, are not subject to paying off the deceased person’s debt.  However, life insurance and retirement benefits payable to the deceased person’s revocable living trust or estate will be subject to payment of debts.

You may be personally responsible for paying off a deceased person’s debt if you co-signed or guaranteed a loan to deceased person. Co-signers on joint credit cards, mortgages and other loans are on the hook for any remaining balances. A guarantor of a loan will have to pay if the deceased person’s assets are not sufficient to cover the loan. In community property states, the surviving spouse is responsible for marital debts.

TIPS:  Be careful about co-signing on credit accounts. And have enough life insurance to cover your debt.

Excerpts taken from “Debt Questions You May Be Afraid to Ask” by Sean Pyles, Q&E Media, Thursday August 10, 2017. For the full article see hometownlife.com

If you have any questions, please call Karen L. Stewart, Attorney and Counselor at (248) 735-0900.

For more information, please see my website, www.customestateplans.com.

 

 

 

TO GO BOLDLY . . . Funerals in Space

Space-blog

The first memorial service in space was in held in 1997, when a private company sold “seats” to carry the ashes of 24 people (including Gene  Roddenberry, the creator or Star Trek)  into sub-orbit. The remains were carried in capsules, comparable in size to a standard AAA battery, so they only contained about one gram of a deceased person’s ashes. The rocket then carried the remains into space and orbited the Earth.  Since then, the idea has continued to grow and capture people’s interest, offering them access to a unique and meaningful resting place. Since Gene Roddenberry’ s flight, the remains of more than  150 people have been “buried in space”, including sixties counterculture guru Timothy Leary,  James “Scotty” Doohan, also of Star Trek fame, and astronaut L. Gordon “Gordo” Cooper.

If you have any questions about estate planning, please call Karen L. Stewart, Attorney and Counselor at (248) 735-0900.

For more information, please see my website, www.customestateplans.com.

 

Pet Trust Primer

Cat

Those of us who think of our companion animals as family members are becoming aware of the fact that part of our responsibility to these dependent creatures is to make sure that their care and comfort continue uninterrupted should we become incapable of caring for them ourselves. One way to plan for that contingency is to set up something called a pet trust. To help you decide if this might work for you, here are some basic definitions and guidelines to keep in mind:

What is a Pet Trust?

A pet trust is a legally sanctioned arrangement providing for the care and maintenance of one or more companion animals in the event of a grantor’s disability or death. The “grantor” (also called a settlor or trustor in some states) is the person who creates the trust, which may take effect during a person’s lifetime or at death. Typically, a trustee will hold property (cash, for example) “in trust” for the benefit of the grantor’s pets.  Payments to a designated caregiver(s) will be made on a regular basis. The trust, depending upon the state in which it is established, will continue for the life of the pet or 21 years, whichever occurs first. Some states allow a pet trust to continue for the life of the pet without regard to a maximum duration of 21 years. This is particularly advantageous for companion animals that have longer life expectancies than cats and dogs, such as horses and parrots.

Why a Pet Trust?

Because most trusts are legally enforceable arrangements, pet owners can be assured that their directions regarding their companion animal(s) will be carried out. A trust can be very specific.  For example, if your cat only likes a particular brand of food or your dog looks forward to daily romps in the park, this can be specified in a trust agreement. If you want your pet to visit the veterinarian four times a year, this can also be included. A trust that takes effect during the life of the pet owner can provide instructions for the care of the animal(s) in the event the pet owner becomes incapacitated (sick, injured, comatose, etc.) Since pet owners know the particular habits of their companion animals better than anyone else, they can describe the kind of care their pets should have and list the person(s) who would be willing to provide that care.

Doing Your Homework

In addition to providing the name and address of a trustee and successor trustee, a caregiver and successor caregiver (all of whom can be corporations and/or individuals) you will be asked to provide enough information to:

  • Adequately identify your pets in order to prevent fraud, such as through photos, microchips, DNA samples, or alternatively, by describing your pet as a “class”—in other words, as “the pet(s) owned by you at the time of your illness/death;
  • Describe in detail your pet’s standard of living and care;
  • Require regular inspections of your pet(s) by the trustee;
  • Determine the amount of funds needed to adequately cover the expenses for your pet’s care (generally, this amount cannot exceed what may reasonably be required given your pet’s standard of living) and specify how the funds should be distributed to the caregiver;
  • Determine the amount of funds needed to adequately cover the expenses of administering the pet trust;
  • Designate a remainder beneficiary in the event the funds in the pet trust are not exhausted;
  • Provide instructions for the final disposition of your pet (for example, via burial or cremation).

Pet trusts can offer pet owners a great deal of flexibility and peace of mind. In the state where no pet law exists, however, or if a companion animal has a longer life expectancy, other arrangements must be considered in combination with or in lieu of a pet trust.

If you have any questions, please call Karen L. Stewart, Attorney and Counselor at (248) 735-0900.

For more information, please see my website, www.customestateplans.com.

Excerpts from ASPCA online, Pet Planning.

 

DID YOU CASH THOSE SAVINGS BONDS YOU GOT AS A KID?

Excerpts from article in the Detroit Free Press on January 23, 2014 by Susan Tompor

The funny thing about giving U.S. savings bonds as a gift for a child’s birthday or other big event is that it doesn’t hurt to nudge the child who turned into a grown-up and ask, hey, did you ever cash those bonds?

Billions of dollars in savings bonds have stopped earning interest but haven’t been cashed. We’re now talking about savings bonds issued in January 1984 and earlier that reached final maturity after 30 years.  Other bonds issued in 1984 will stop earning interest later this year, depending on what month they were issued.

Who could complain if they were able to uncover $500 or $1,000 of their own bonds just somehow sitting there uncashed? Currently, there are about 47 million unredeemed matured savings bonds worth $16.1 billion.

A few months ago, I did my own bonds search via the U.S. Treasury Department website at www.treasuryhunt.gov. I took a look on the off chance that I lost some savings bonds of my own. When you use Treasury Hunt, you plug in your Social Security number and other information online to find savings bonds that reached final maturity and are no longer earning interest. The Treasury Hunt program can find bonds that were issued in 1974 and after, not earlier. Social Security numbers were not required on bonds until 1974.

After I completed the Treasury Hunt, I was alerted via e-mail that, yes, I had bonds that had matured. How much were they worth? I didn’t know at this point. To get more information, I’d have to file Form PD F 1048. It’s not an overly cumbersome process and if there’s money to be found, it’s worth it.

About six weeks or so after the paperwork was sent, I received a phone call. Using my Social Security number, the Treasury tracked down that a gift bond existed under my number and someone else’s name. The woman did not tell me the name on those bonds. But I quickly guessed it had to be one of my sister’s kids. I bought bonds in the past in the child’s name and my sister’s name. After more research, our family pegged the uncashed bonds to a little girl who had a Holy Communion at St. Florian Church in Hamtramck in 1983. My niece, now a mother of two, had not cashed a group of her bonds that reached full maturity in 2013, or 30 years after she received those gifts.

Once I told her what I uncovered, she dug in her files and found the bonds. And she spotted other savings bonds, too. She ended up looking at an unexpected windfall of $1,955.92 for four bonds bought in 1983 and a fifth bond bought in 1984 that will stop paying more money in interest in April. A bond with a $500 face value in her group was worth $1,153.20 once she cashed it. She will need to pay taxes on $903.20 in interest on that one bond.

What’s the lesson here? It does not hurt to do a Treasury Hunt. It may be possible that you bought some bonds as gifts, and the bonds never got cashed 30 years or more later. It’s OK to do such searches maybe once a year or so because bonds can show up as they reach their final maturity each month. There’s a chance that your search could turn up bonds you bought as gifts using your Social Security number. “There’s a lot of bonds out there with other people’s Social Security numbers,” said Daniel Pederson, who has a Monroe-based blog about savings bonds. That’s because so many bonds were bought as gifts in years past. Decades ago, children didn’t get Social Security numbers at birth. And if the purchaser did not know the Social Security number of the designated owner or co-owner, the purchaser could have used his or her own number.

The next time you see a loved one, it might be a good time to ask, “Hey, did you ever cash those savings bonds?”

If you have any questions, please call Karen L. Stewart, Attorney and Counselor at (248) 735-0900

For more information, please see my website www.CustomEstatePlans.com.

 

 

Remember: It is important to fund your Revocable Living Trust

To achieve full benefit from a living trust, it is important that appropriate action be taken to transfer assets into trustee ownership.  This process is often referred to as “funding” the trust.  Any asset that is transferred to your trust while you are living does not go through the probate court upon your death, but instead, passes under the terms of the trust in a private manner. Therefore, funding your Trust can save your family lots of time and money in administering your estate!

Funding a living trust consists of the following:

  • Retitling your bank accounts into your name as trustee of your trust
  • Retitling the deeds to real estate into your trust name
  • Retitling stocks, bonds and investment accounts into your trust name
  • Retitling business interests into your trust name
  • Naming the successor trustee of your trust as beneficiary on life insurance policies
  • Naming your successor trustee as beneficiary of annuities
  • Naming your trust as beneficiary of retirement benefits, if appropriate.  There are income tax consequences to be considered, so this should be discussed with me or your tax advisor.

There can be other unintended consequences of not funding your trust.  For instance, if life insurance is payable to a minor, a conservatorship will need to be established through the probate court and the life insurance company will pay out to the conservator, and not to your successor trustee.  Your trust may say to hold funds for your children until they are 30 years old, but the conservator can only hold the funds until your child is 18 years old and then the whole ball of wax is turned over to the child!  Not to mention the added time and money spent on hearings and accountings to the court.

Please make sure you haven’t set up a beautiful revocable living trust that is an empty shell.  You can make an appointment with me at any time to review the funding of your trust and make sure you are on the right track.

If you have any questions, please call Karen L. Stewart, Attorney and Counselor at (248) 735-0900.

For more information, please see my website, www.customestateplans.com.

 

AFTER THE DEATH OF A LOVED ONE: Checklist for Administering an Estate

After losing a loved one, it can be a very confusing and emotional time and families are often at a loss as to all there is to do to get the affairs in order and where to start.  So, we have compiled a checklist to assist families through the process.  The list is not exhaustive, so if you have a situation that is not covered, please feel free to give me a call.

  1. Contact the Social Security Administration (and Veterans Administration, if applicable) to let them know of the death. A death benefit of $255 may be payable to the family.
  2. Check with the employer as to any unpaid wages or benefits, life insurance and pensions.
  3. Compile a list of assets and how they are titled, i.e. jointly held with another, held in trust, etc. and if there are any beneficiary designations. Assets in the deceased’s name alone that have no beneficiary designation will need to go through the Probate Court.
  4. Look for estate planning documents, i.e. a Last Will and Testament or a Revocable Living Trust. Send copies to beneficiaries and keep them informed of Estate matters.
  5. Compile a list of liabilities (mortgage and other debts) and ongoing expenses such as utilities. These creditors may need to be served notice if there is a probate estate.
  6. Contact companies regarding IRAs, 401ks, life insurance and annuities to submit claim forms.
  7. Get a tax ID# for the Estate from the IRS, if necessary.
  8. Set up an estate bank account and/or transfer bank accounts to the joint owner or beneficiary.
  9. File the deceased’s final income tax return. Annual income tax returns for the Estate are necessary if the Estate earns more than $600 in a one year period.
  10. Transfer titles to vehicles to beneficiaries. If no other assets are to be probated, the Secretary of State’s Office will transfer vehicles up to $60,000 in value without probate.
  11. Sell real estate or transfer to beneficiaries. Remember to keep enough money in the estate bank account to cover expenses while the property is listed for sale.
  12. Make sure you pay off the funeral expenses and all creditors before distributing to beneficiaries. If the debts exceed the value of the Estate, the beneficiaries are not responsible for the excess debt unless they have co-signed or are a joint debtor.
  13. The executor of the Estate is allowed to take a reasonable fee for his or her services, so log your hours right from the start, even if you don’t think you will take a fee. Sometimes, people change their minds once they realize all there is to do and wish they had kept records.
  14. Cancel all credit cards and tear them up. Cancel subscriptions, health and car insurance, utilities etc. that are in the deceased’s name.
  15. Don’t worry – it will come to an end!

If  you have any questions, please call Karen L. Stewart, Attorney and Counselor at (248) 735-0900. For more information please see my website, www.customestateplans.com.

 

NEW LAW: The Funeral Representative Designation Act

We are now able to offer our clients in Michigan a new document which the estate planning community has been seeking for years. Thirty-nine other states have already adopted similar laws and now, effective June 27, 2016, we have the “Funeral Representative Designation Act” (the “Act”). This new Act provides for one individual (the “Declarant”) to give another individual (the “Funeral Representative”) the right and power to make decisions about funeral arrangements and the handling, disposition, or disinterment of the Declarant’s body, including, but not limited to, decisions about cremation, and the right to possess cremated remains of the Declarant.

Until this Act, Michigan residents were stuck with what was a “next of kin” order of individuals who can make funeral decisions. The antiquated law seemed to ignore the realities of second marriages, estranged children, childless marriages, same-sex couples, and so forth.

Now, if no Funeral Representative is designated, funeral decisions are made by the next of kin in the following priority: your surviving spouse; your children; your grandchildren; your parents; your grandparents; your siblings; descendants of your parents (i.e. nieces and nephews); and descendants of your grandparents (i.e. aunts and uncles).

Anyone can be designated as Funeral Representative if the individual is at least 18 years of age and is not an employee associated with a funeral, cemetery, crematory or health facility providing services, unless that individual is among a class of certain relatives. The Declarant may also name a successor if the first named Funeral Representative is unable to act.

There is presently some discussion concerning to whom the Funeral Representative owes a fiduciary duty. This may be the most controversial part of the Act. According to the Michigan Association of Funeral Directors and some others, the duty does not run to the Declarant because “funeral rites exist for the benefit of the living”. The potential conflict would seem to be when a Declarant has made certain wishes known to the Funeral Representative and the next of kin objects to those wishes. Is the Funeral Representative bound to follow the Declarant’s wishes or does the Funeral Representative have a duty to the next of kin? The Act is not clear on this point. Disagreements may have to be ironed out by petitioning the probate court.

It should also be noted that the Act provides that the Funeral Representative is required to guaranty payment for the costs associated with the decision concerning the disposition of the Declarant’s remains. For this reason, we suggest that if you decide to execute a Funeral Representative Designation, you provide for payment of the costs and arrangements made by your Funeral Representative in your Will or Trust, by a prepaid funeral contract or another type of pre-need arrangement, or through a life insurance policy.

We also suggest that you formally state your funeral wishes in writing and attach it to the Funeral Representative Designation. We have designed a form you can use for this if you need some guidance. Clear instructions are likely to be followed by the Funeral Representative and accepted by the next of kin. It is our hope, and some feel there is a good chance, that Michigan’s law will someday be amended to expressly allow an individual to state his or her specific wishes that must be followed.

Finally, you should share this document with your designated Funeral Representative and any successor you name. That way, he or she can get involved as soon as possible after your death, especially if the Funeral Representative is not a next of kin relative.

If you have any questions, please call Karen L. Stewart, Attorney and Counselor at (248) 735-0900.  For more information, please see my website, www.customestateplans.com.

What are the Advantages of a Revocable Living Trust?

The self-trusteed living trust is a popular variation of living trust. You serve as the trustee of your trust while you are alive and competent and name a successor trustee to act in the event of your death or incapacity. Assets previously held in your sole name are registered in your name as trustee of the trust. If you become incapacitated, the successor trustee continues the administration of the assets for your benefit.  After your death, the trust can continue for the benefit of others. All of the advantages of a living trust described here apply to a self-trusteed living trust.

Probate Avoidance

Probate is the court process by which title to assets owned in your name alone are transferred after your death. Probate may be expensive and time-consuming depending on the value and type of assets in your estate. Placing assets in a living trust is a method by which you can avoid the expense and delays sometimes associated with probate court proceedings.

Even more costly and time-consuming than probate proceedings for decedents are guardianship and conservator proceedings for people who have become incapacitated. Through a living trust, you select a successor trustee to manage your affairs should you become incapacitated, thereby avoiding court proceedings and the court-supervised management of your assets and affairs.

Privacy

When your estate goes through probate, your Will and other documents become public record. A living trust provides you with a greater degree of privacy because the trust provisions and the assets in your estate are not subject to public disclosure.

Estate Tax Savings

If the value of your estate is more than the amount excluded from federal estate tax, it could be subject to estate tax when you die. A trust may enable you to reduce or eliminate estate tax through the latest tax-saving techniques and ensure that more of your estate goes to the people or charities that you choose.

Management of Assets for Children or Grandchildren

You select a person to serve as successor trustee so that trust assets can be maintained in the trust after your death instead of being distributed outright to beneficiaries who may be unable to handle the management of assets themselves due to their age, disability or other factors. Without a trust, a minor receiving an inheritance would need to have a conservator appointed by the probate court to manage the inheritance. At age 18, the funds would be turned over to the beneficiary. With a trust, the trustee can manage the funds until the beneficiary is older and more mature.

 

Article written by Karen L. Stewart, Attorney and Counselor. For more information, please see my website, www.customestateplans.com.

 

Checking for Unclaimed Assets is Always a Good Idea

There are literally tens of billions of dollars of assets that owners have forgotten about that have been turned over to the government. These include things such as bank accounts, payroll checks, dividends and contents from safe deposit boxes. For example, when a bank account has no activity for a year or more, banks are required to turn that money over to the state. Another example is where a company sends a dividend check to a shareholder and the check is never cashed. These assets are turned over to the state until they are claimed by the rightful owner. In many situations, the money is never claimed.

You may ask why someone wouldn’t reclaim their assets. The simple answer is, they either forgot that they own the asset or the individual died and the family either forgot or did not know about the asset. Every state has an unclaimed property division that allows people to reclaim those assets. Every year or so, it makes sense for everyone to check to see if there were any assets forgotten about that the state has taken control over.

It would be nice if there was one place you could look and it would tell you if there were any assets from anywhere in the country that you have lost, but there is no national registry. Some states have joined with other states to combine their registries; unfortunately, Michigan is not one of them. If you have always been a resident of Michigan, then the only place you probably need to look is the state of Michigan’s registry. If you have lived in other states, you must review those registries individually as well. You can check the Michigan registry online by going to www.michigan.gov and clicking on “unclaimed property.” Another good site to check is www.missingmoney.com.

If you find there are assets you are entitled to, there is generally no statute of limitation and the procedure to reclaim your assets is not complicated. Typically, all you need to do is to complete a form and submit it to the state. However, if the unclaimed property is for a loved one who has died, it becomes a little more complicated. You have to show that you are the appropriate beneficiary. In some situations, you may have to open a probate to reclaim those assets.

There are many companies that offer services to search and help you reclaim your assets. However, these companies are not inexpensive in the fact that they charge a substantial percentage of the assets they reclaim. The majority of people, particularly those who have only lived in one state, can do the search themselves and save a substantial amount in fees.

Unfortunately, not all unclaimed assets will be turned over to the state. For example, there are billions of dollars in life insurance policies that have never been claimed and the proceeds from those policies have not been turned over to the state. Searching for lost life insurance policies is a little more difficult; in those cases, there is not a national registry, so you must contact every company individually. There is, however, a service that you can use. MIB Inc. (www.mib.com) offers a service for $75. It will search life insurance applications for you from 420 life insurance companies from January 1996 to the present.

Excerpts from Rick Bloom’s “Money Matters”, Hometownlife.com, February 16, 2017.