An Introduction to Probate and Intestacy

By:

Kristin K. Vanpraet

Shepard Law Office

What is probate?

Probate is the legal process that takes place after someone dies.   When a person dies, with or without a Will, the probate court must oversee the distribution of that person’s estate.

If a person dies leaving a Will, then the court will decide the validity of that Will (which is usually a routine matter) and interprets the instructions left by the deceased person.  The Will should appoint a Personal Representative, sometimes referred to as an Executor, to handle the leg work of distributing the estate according to the instructions of the will.   If the Will does not appoint a personal representative or if the person appointed is unable or unwilling to serve, the court will appoint someone.

Contrary to some belief, executing a Will does not avoid probate.  The only estate plan that will avoid probate is a well executed trust.

If a person dies without a Will this is known as dying “intestate”.  When a person dies intestate, the court must authorize the distribution of the estate through the laws of intestacy.  This means that whatever wishes a person had, if not put into the form of a valid Will, may not necessarily be accomplished.

What is the probate process?

In general, after a person’s death, the person named in the deceased person’s Will as Personal Representative or, if there is no will, the person appointed by the probate judge files papers in the local probate court.

The Personal Representative proves the validity of  the  will and files with the probate court a list of property, a list of debts, and a list of who is to inherit.  Once this is completed, all relatives, those named in the will and creditors are officially notified of the death.

The Personal Representative must find, acquire and deal with the assets during the probate process, which commonly takes a few months to a year. At a minimum, the process will take four (4) months as this is the amount of time the estate must be left open for creditor’s claims.  Depending on the provisions of the will and the amount of debts, the Personal Representative may have to decide whether or not to sell real estate or other property to pay them.

Eventually, once the debts and taxes have been paid, the court will grant the Personal Representative permission to divide the rest among the people or organizations named in the Will. Finally, all property will be transferred to its new owners.

Intestate Distribution:

Michigan distributes in the following manner:

If there is a living spouse, the living spouses share is distributed in one of the following ways according to 700.2102:

(a) The living spouse will get the entire intestate estate if descendant or parent of the deceased person are still living.
(b) If the deceased person has living descendants and they are also descendants of the living spouse, then the living spouse receives the first $150,000*, plus 1/2 of any balance of the intestate estate.

(c) If the deceased person has no descendants, but has a living parent then the living spouse receives the first $150,000*, plus 3/4 of any balance of the intestate estate.
(d)If the deceased person has living descendants with the living spouse and the living spouse has one or more descendants who are not descendants of the deceased person then the living spouse receives the first $150,000*, plus 1/2 of any balance of the intestate estate,

(e) If 1 or more, but not all, of the deceased person’s living descendants are not descendants of the living spouse then the living spouse receives the first $150,000*, plus 1/2 of any balance of the intestate estate,
(f) If none of the deceased person’s living descendants are descendants of the living spouse, the living spouse will receive the first $100,000.00*, plus 1/2 of any balance of the intestate estate,

*The amounts shall be adjusted each year for cost of living.  For 2009 $150,000 = $201,000 and $100,000 = $134,000.

According to 700.2103, If a person dies without leaving a living spouse or if any part of the intestate estate that does not pass to the deceased person’s living spouse under 700.2102, the intestate estate passes in the following order to the those who survive the deceased person: 
(a) The deceased person’s descendants by representation.

(b) If there is no living descendant, the deceased person’s parents equally if both are living or to the still living parent.
(c) If there is no living descendant or parent, the descendants of the deceased person’s parents or of either of them by representation.

d) If there is no living descendant, parent, or descendant of a parent, but the deceased person is survived by 1 or more grandparents or descendants of grandparents, 1/2 of the estate passes to the deceased person’s paternal grandparents equally if both survive, or to the living paternal grandparent, or to the descendants of the deceased person’s paternal grandparents or either of them if both are deceased, the descendants taking by representation; and the other 1/2 passes to the deceased person’s maternal relatives in the same manner. If there is no living grandparent or descendant of a grandparent on either the paternal or the maternal side, the entire estate passes to the deceased person’s relatives on the other side in the same manner as the 1/2.

By: Kristin K. Vanpraet

Attorney & Counselor at Law

Shepard Law Office PLC

Myth 1: If you do not have an estate worth more the 3.5 Million which triggers tax issues; you do not need a living trust.

Avoiding taxes is just one of many reasons to have a living trust, and may not be the the most important reason to you.  Having a living trust also gives you many advantages, some of which include:

1.    It avoids probate. If you die with any type of property or money, and have no estate plan or only a will, your estate will have to be probated.  By establishing a living trust, anything owned by your trust will pass outside of probate, thus avoiding the hassles of probate.

2.    It allows you to maintain control of your money. By establishing a living trust, you can place conditions on beneficiaries and maintain control of how your money and property is distributed, not just to who but also when and how.  For example, if you want your child to receive his or her inheritance only after completing medical school, you can make that condition part of the trust.  The trustee you appoint will hold the child’s inheritance in the trust until the child has completed medical school.  This is just one example of the control a living trust allows you to maintain after your death.

3.    It maintains privacy. Because a living trust does not have to go through the probate system, the terms of your estate will remain private.  When an estate is probated in court, there is a public record – of all property and assets, a trust avoids probate and thus, no public court record.

4.    It will protect your interests if you become disabled. Unlike a will which becomes effective only when a person passes away, a trust can become effective immediately. Why would you want to do this? Statistically is more likely that you may become disabled or have limited ability at some time in your life before passing away. With a trust in place you can make sure that all your bills are paid for if you are not able to do it yourself.

Myth 2: If you put your property into a trust, you no longer own or control that property, the trust does.

When you create a revocable trust, as the trustee of that trust, you always control the property and money in the trust. The property may be titled to the trust but you still have ownership. You will always have the ability to buy, sell, and control the property however you want. You also have the ability to revoke the trust at any time.
In conclusion, a living trust does not need to be complicated; it can be as simple or as complex as you wish it to be. However all trusts should be prepared specifically for you by a professional estate planning attorney because everyone has needs and desires. An estate planning attorney will help you decide what options are best for you.

By: Kristin K. Vanpraet

Attorney & Counselor at Law

Shepard Law Office PLC

Many of my clients tell me they have put their child’s name on their bank accounts. They usually have done this for one or both of the following reasons: First, they want their child to be able help them pay their bills and look out for their finances. The second is they want to avoid probate.

Consequences:

While doing this may do what they want it to, I usually advise against it. Many people don’t know that putting your child (or any other person) on your account has the following downsides:

1. The money in that account now legally belongs to your child as well as to you.
2. The money in that account is now counted as an asset for that child.

What does this mean? It means that your child may spend that money without having to be held responsible to you. Because their name is on the account, it is their money. Additionally, any of their creditors can get hold of the money in that account. If your child defaults on a loan or is loses a lawsuit and a court orders them to pay money, money in your account may be taken to pay the money they owe..

A Better Solution:

Management of Finances - A better way to give your child the authority to help you financially is to make a Durable Power of Attorney. This document will give them legal authority to act on your behalf, but your assets do not become theirs. Additionally, by legally accepting this authority, they will have a responsibility to act in your best interests. If they abuse their position, they can be held accountable.

Probate - To avoid probate, most financial institutions will let you to make your accounts transferable on death. This means that when you die, the account will automatically transfer to the person you have named.

Conclusion:

While you want your children to have the ability to assist you, and you don’t want your family to have to go through probate, putting their name on your account is not the answer. The methods suggested above are much safer techniques to use to accomplish your goals. They let your children to assist you and still protect your assets.

By: Matthew C. Shepard

Attorney & Counselor at Law

Shepard Law Office PLC

Have you ever heard a term and wondered what exactly does that mean? This article was written to identify five of the basic “tools” in an estate plan. In later articles I will go into more details of these individual tools.

Estate Planning – This can best be summarized as financial planning for now and the future. Normally we can break this into three sub-categories: Planning for the now, planning for the future and planning for final distribution. This is a very broad term and should involve insurance, financial advising and legal counsel to be done properly.

Last Will and Testament – A document that tells the family, friends and courts what you want done with your assets upon passing away, every estate plan at a minimum will have a will.

Living Trust – A living trust is a document that creates an entity. This entity holds legal title to property. This is done so that property that is in trust does not go through probate court. You may still possess the ability to buy, sell or transfer property depending on the type of trust.

Medical Power of Attorney – A Medical Power of Attorney authorizes an individual (called a patient advocate) to make medical decisions on your behalf when you are unable to do so yourself. Medical directives tell the patient advocate what your desires are in reference to life support, pain medication, etc.

Durable Power of Attorney – A Durable Power of Attorney authorizes an individual (called an attorney-in-fact) to make financial decisions on your behalf. These powers can be concurrent with your and/or when you are unable to make medical decisions yourself.

Enhanced Life Estate Deed – Also called a ladybird deed, this document is a deed on property and it allows the owner to do anything that can do with a regular property deed, however upon passing away the property automatically transfers ownership to the individual listed as the remainder. I will be going this document in much greater detail at a later date – this is a newer estate planning tool and one that I believe will have a great impact on the estate planning community.

Remember, this document is for information purposes only and should not be taken as legal advice. Also, these definitions are very basic and used to give you a basic understanding of what each item is, in later articles are I will dive deeper into types of trusts, types of wills, etc… Thanks for reading…

By: Matthew C. Shepard

Attorney & Counselor at Law

Shepard Law Office PLC

A lot of people have been persuaded to have their estate plan done online or through some mass marketing company that promises “the best deal”. Unfortunately, half of these “deals” will end up in disaster because they are not prepared properly.

Each state has different rules in reference to the preparation of an estate plan. The only person who should be preparing an estate plan is someone who is well versed on that particular state’s rules (that means an attorney). Before you go out and look for the best deal, look around - talk to a couple of estate planning attorneys. You may find that hiring an attorney won’t cost you any more than some of these companies.

Here is a warning from the State Attorney General:

A warning from the State Attorney General regarding commercial estate planning companies:

Living Trusts

Beware of “One-Size-Fits-All” Estate Plans

A revocable living trust can be an important tool in estate planning for many people. A revocable living trust is a trust instrument that may be changed during the lifetime of its grantor, the person who sets up the trust. It is called a “living trust” because the maker is alive, in contrast to a testamentary trust, which is not effective until after the death of its maker. By itself, the living trust instrument is probably a legal document. However, a subject as important as estate planning should be discussed with trusted professional counsel, including your attorney and financial planner.

In recent years, several for-profit companies have begun marketing living trusts over the telephone, by postcard, by in home sales pitches, and in regional meetings, often held at restaurants or in hotel conference rooms or even senior centers and public libraries. Likely targets of the promotional marketing are senior citizens. The one-size-fits-all trust forms being sold at these events vary greatly in quality and may not be appropriate for your individual estate planning needs. Contrary to some sales pitches, not everyone benefits from a living trust.

Sometimes customers pay exorbitant fees for these trusts. A typical charge by one of the trust kit companies is $1,995.00 per trust. Trained salespersons may exaggerate consequences of failing to buy their products, or may employ high pressure tactics to close a sale and not disclose that the thick, expensive-looking finished document is only a living trust “kit.” (A “kit” is a prepackaged, standardized form document—it is not tailored for the customer’s particular circumstances.) The following tips can help consumers in making a wise decision before purchasing a living trust:

1. Consumers should be wary of salespersons who call on the telephone, send a postcard, or appear at the doorway offering living trusts.

2. Do not be pressured into purchasing a trust based on a phone call, or the in-home sales pitch of a salesman, or immediately following a seminar. Before making any purchase decision, consult with a reliable professional with the necessary background to help you decide what estate plan is best for your individual situation, rather than relying on someone whose primary interest is a sales commission.

3. Before buying a living trust from a stranger, call a local lawyer and ask him/her what they charge for preparing trusts. Often the kit price is two or three times greater than what a local lawyer would charge. Those selling trust kits rely on the public’s apprehension that attorneys are costly.

4. If you already have a lawyer, discuss the trust kit offer with him or her before buying.

5. Be wary if a trust salesperson promises specific results or dollar savings. Costs of probate and attorney fees vary greatly from state to state, and according to personal circumstances.

6. If the trust salesperson promises a lawyer will review the customer’s documents, demand the name of the lawyer and check with the State Bar of Michigan to make certain the lawyer is licensed to practice in Michigan.

7. If the salesperson says that his or her company or the living trust being sold is recommended or endorsed by AARP, do not buy! AARP does not endorse or recommend any living trust product at this time.

8. Do not give personal and confidential family and financial information to a salesperson, even if the salesperson promises it will be passed on to a licensed lawyer. Meet with or discuss the matter with the lawyer personally.

9. Watch out for companies that sell trusts and also try to sell annuities or other investments. Under the guise of setting up a living trust, financial information may be disclosed to sales agents who earn high commissions by “moving” existing investments into others being sold by the living trust company.

10. If the salesperson says part of the trust cost will pay the lawyer’s fee, do not buy! A lawyer may not split a fee with the salesperson or with the trust company.

11. Discuss whether you can get your money back if you are not satisfied, and get the promise in writing.

12. If you encounter problems later, first contact the company or the lawyer and ask for a refund.