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.

Michigan Dower Rights Abolished

Until very recently, Michigan had the distinction of being the only state in the union to recognize dower rights in a wife, but not reciprocal rights in her husband. On January 6, 2017, Governor Snyder signed into law SB 558 and SB 560 abolishing these rights. These bills will take effect 90 days after signing.

If the word “dower” reminds you of “dowry,” it’s because they’re from the same root, dating from the days when women could not legally own property. Dower rights allowed women the use of their husbands’ real property during their own lifetime. If you have ever wondered why a deed of real property might reference “John Smith, a married man,” that’s an allusion to Mrs. Smith’s dower rights, putting potential transferees on notice that Mrs. Smith would need to sign off on a transfer of the property.

Relatively few women in Michigan exercised their dower rights, and the laws granting them might have remained in place, but for the decision of the U.S. Supreme Court in Obergefell v. Hodges and DeBoer v. Snyder. This decision held that states must license marriage between two people of the same sex and must recognize a marriage between two people of the same sex performed in another state. All of which raised the question: how, if at all, would dower work for a woman who was married, not to a man, but for another woman?

Same-Sex Marriage and Michigan Dower Rights

Michigan statute and case law regarding dower rights were written in such a way that it was clear that they would not apply to same-sex marriage. A group of Michigan legislators attempted without success to develop some gender-neutral form of property interest. The Real Property Section of the State Bar of Michigan had reservations about the effort, citing the possible constitutional issues inherent in creating a new property interest, as well as the complication of title issues. Due in large part to these practical objections, there was insufficient support for a gender-neutral makeover for dower.

The next logical step was to consider abolishing statutory and common law dower from the Estates and Protected Individuals Code (EPIC) and eliminating the requirement that dower rights be addressed in Michigan divorce judgments. This is what SB 558 and SB 560 accomplish. There is a limited exception, preserving dower rights of a widow whose husband died prior to the effective date of these bills.

What the Abolition of Dower Means for Michigan Residents

As a practical matter, the abolition of dower rights in Michigan will probably not affect most individuals very much. The change in law slightly simplifies the transfer of real estate for married men who own real property in their sole names. Aside from that, the chief benefit of the change in the law is that it brings Michigan more in line with the realities of life in the 21st century and the laws of other states.

It remains to be seen what effect this might have on title insurance company requirements when Michigan real estate is conveyed and probate court procedures/documents. Stay tuned.

If you have any questions on Dower rights, please contact Karen Stewart at 248-735-0900.

Excerpts from Estate Planning & Elder Law Services Newsletter, January 2017.

What is an Estate Plan and do I need one?

A good estate plan provides for both what happens after your death and during a period of incapacity or disability. You do not need to be wealthy to have an estate plan. In fact, just about everyone could benefit from an estate plan. Some of the questions you may ask yourself are:

  • Who will manage my finances and make my medical decisions if I am unable to do so?
  • Who should receive my estate and how much should they get? Should they be given the assets outright or will they require someone to manage the assets for them?
  • Who will administer my estate to carry out my wishes and maximize the inheritance to my loved ones?

To adequately protect you and your family in the event of disability or death, it is important to have a well thought out and comprehensive plan. There are four documents in a basic estate plan.

  1. Last Will and Testament. A Will passes property in your own name alone that does not have a beneficiary designation, is not jointly held with another or is not held in trust. If you have assets in your name alone, there will be probate administration of your estate. A Will is also where you name guardians for minor children.
  1. Revocable Living Trust. Trusts are established for many reasons and by persons of all income levels. With a self-trusteed trust, you place assets in a trust managed by you for your own benefit. In addition, you name a successor trustee to take over if you become incapacitated to manage the trust assets for your continued benefit. Upon your death, your successor trustee distributes the trust assets to the persons you name in the trust in a private manner outside of the probate court. Thus, you save the time and expense of probate administration of your estate. Assets may continue in trust after your death to provide for the care and support of your children until they are financially and emotionally mature enough to manage their own inheritances. Revocable trusts can be amended by you at any time or revoked if you do not wish to have the trust anymore.
  1. Durable Power of Attorney. A Power of Attorney is a legally binding document by which you authorize another person to act on your behalf to manage your finances. It avoids the necessity of someone having to go to the probate court to be appointed your Conservator if you become incapacitated, who may or may not be the person that you would choose.
  1. Patient Advocate Designation. Also known as a medical power of attorney, the Patient Advocate Designation is a Michigan document which allows you to appoint a patient advocate to make medical decisions for you, including termination of life support, if you are unable to make these decisions for yourself. Without it, your loved ones may be forced at the time of a medical crisis to petition the probate court for the appointment of a guardian for you.

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

Consider State Taxes When Deciding Where to Live in Retirement

When you retire, you may consider moving to another state — say, for the weather or to be closer to loved ones. State taxes also may factor into the equation.

Identify and Quantify All Applicable Taxes
It may seem like a no-brainer to simply move to a state that has no personal income tax, such as Nevada, Texas or Florida. But, to make a good decision, you must consider all of the taxes that can potentially apply to a state resident, including:

• Income taxes;
• Property taxes;
• Sales taxes; and
• Estate taxes.

For example, suppose you’ve narrowed your decision down to two states: Texas and Colorado. Texas currently has no individual income tax, and Colorado has a flat 4.63% individual income tax rate. At first glance, Texas might appear to be much less expensive from a state tax perspective. Not necessarily. The average property tax rate in Texas is 1.93% of assessed value, while in Colorado it’s only 0.62%.

Within the city limits of Dallas, the property tax rate is a whopping 5.44%. So, a home that’s assessed at $500,000 would incur an annual property tax bill of $27,200 if it’s located in Dallas, compared to only $3,100 in Colorado. That difference could potentially cancel out any savings in state income taxes between those two states, depending on your income level. Of course, there are other factors to consider in any move, including taxes in the exact locality in the state.

If the states you’re considering have an income tax, also look at what types of income they tax. Some states, for example, don’t tax wages but do tax interest and dividends. And some states offer tax breaks for pension payments, retirement plan distributions and Social Security payments.

Excerpt from EHTC CPAs and Business Consultants Newsletter dated 1/12/2017

Big tax benefit for IRA could disappear

Retirement accounts and estate plans may soon be taking a major hit from the Internal Revenue Service, if Congress decides early next year to change the rules on a tax strategy involving inherited IRAs that many families have used to their advantage for years.

Under current rules, people who contribute to an individual retirement account (IRA) and don’t need the money to meet retirement living expenses can pass the account along to their heirs. That money is then allowed to keep growing tax-deferred throughout the heirs’ lifetime, with minimal taxes due on withdrawals.

But the ability to stretch an IRA across generations could be coming to an end. The Senate Committee on Finance voted 26-0 in September to kill the “Stretch IRA” for non-spousal beneficiaries – which means the tax man could be collecting trillions of dollars of legacy wealth.

“This is going to be big,” said James Lange, a Pittsburgh- based tax accountant, attorney and author. “It’s not a done deal. … But in the past when you had a 26-0 Senate vote, the legislation always became law the next year.”

For the average American, the retirement account is the household’s largest source of wealth, second to the house, explained Jim Meredith, executive vice president of the Hefren-Tillotson financial advisory firm. “The ability to transfer that wealth to the second or third generation will fall away with this legislation.”

“Currently,” he said, “Congress has to wait about 40 years to get the assets in retirement accounts converted into income tax payments. If non-spousal beneficiaries must pay the tax bill off in five years instead of over their actuarial life span, there will be a huge windfall for the government.”

The Senate proposal will be included in a bill called the Retirement Enhancement and Savings Act and would require beneficiaries of an inherited IRA or other qualified retirement account to pay all taxes due on the account within five years of the owner’s death. The proposed law does not apply to surviving spouses, who may still spread the taxes due on the account across their life span or roll the money into another retirement account. The proposed rule also would not affect Roth IRAs because taxes on those accounts have already been paid with after-tax income by the account owner.

The total amount of money at stake is substantial. Total U.S. retirement assets were $24.5 trillion as of June 2016, up 1.3% from the end of March, according to the Washington, D.C.-based Investment Company Institute.

From the Detroit Free Press, 12-28-2016, P. A11