Michigan Estate Planning Lawyer Blog

A new law suit in Missouri has been started against LegalZoom, those creators of do-it-yourself estate planning documents. The lawsuit claims that LegalZoom is engaged in the unauthorized practice of law and sites a cease-and-desist letter from the North Carolina State Bar's Unauthorized Practice Committee. You can read a short article about the suit at Suit Claims LegalZoom's Document Prep is Unauthorized Practice.

If you listen to the news and talking heads you would think that with our 2010 "repealed" estate tax, everything is wonderful for those who want a low overall tax burden. Well, that might not be the case. Take a look at this Wall Street Journal article entitled "Why No Estate Tax Could Be a Killer."

The article points at that while there is no estate tax to speak of, under current law, in 2010, there is a change in how the capital-gans tax rules are handled.  According to the article, estates with assets between $1.3 and $4.3 million would have been better off under last years estate tax rules, while bigger estates will have more of a tax savings this year.

Where do we go from here?  Who knows.  We all thought that the $3.5 million exemption amount we had last year would have been frozen and carried forward.  However, our government took no action.  The later we get into 2010, the more that I think we will look at the estate tax exemption coming back at $1 million per the current law for 2011 and beyond.

Either way, it is important that your estate plan be reviewed to make sure that the Federal Tax planning strategies that were used are still sufficient.

The Elder Law Prof Blog has an interesting little post dealing with the Hong Kong Billionaire, Nina Wang's estate. Apparently, Ms. Wang who was known as "Little Sweeite" had a will drawn up in 2002 leaving her estate to a charity. A Judge just ruled that a "feng shui will" from 2006 would be invalidated due to Ms. Wang's signature being forged. You can read the post here: Feng Shui Master won't Inherit Eccentric Billionaire's Estate.

Here are 10 Reasons to Create your Michigan Estate Plan right now.

Many people think that estate plans are for someone else, not them. They may rationalize that they are too young or don't have enough money to reap the tax benefits of a plan. But as the following list makes clear, estate planning is for everyone, regardless of age or net worth.

1. Loss of capacity. What if you become incompetent and unable to manage your own affairs? Without a plan the courts will select the person to manage your affairs. With a plan, you pick that person (through a power of attorney).

2. Minor children. Who will raise your children if you die? Without a plan, a court will make that decision. With a plan, you are able to nominate the guardian of your choice.

3. Dying without a will. Who will inherit your assets? Without a plan, your assets pass to your heirs according to your state's laws of intestacy (dying without a will). Your family members (and perhaps not the ones you would choose) will receive your assets without benefit of your direction or of trust protection. With a plan, you decide who gets your assets, and when and how they receive them.

4. Blended families. What if your family is the result of multiple marriages? Without a plan, children from different marriages may not be treated as you would wish. With a plan, you determine what goes to your current spouse and to the children from a prior marriage or marriages.

5. Children with special needs. Without a plan, a child with special needs risks being disqualified from receiving Medicaid or SSI benefits, and may have to use his or her inheritance to pay for care. With a plan, you can set up a Supplemental Needs Trust that will allow the child to remain eligible for government benefits while using the trust assets to pay for non-covered expenses.

6. Keeping assets in the family. Would you prefer that your assets stay in your own family? Without a plan, your child's spouse may wind up with your money if your child passes away prematurely. If your child divorces his or her current spouse, half of your assets could go to the spouse. With a plan, you can set up a trust that ensures that your assets will stay in your family and, for example, pass to your grandchildren.

7. Financial security. Will your spouse and children be able to survive financially? Without a plan and the income replacement provided by life insurance, your family may be unable to maintain its current living standard. With a plan, life insurance can mean that your family will enjoy financial security.

8. Retirement accounts. Do you have an IRA or similar retirement account? Without a plan, your designated beneficiary for the retirement account funds may not reflect your current wishes and may result in burdensome tax consequences for your heirs (although the rules regarding the designation of a beneficiary have been eased considerably). With a plan, you can choose the optimal beneficiary.

9. Business ownership. Do you own a business? Without a plan, you don't name a successor, thus risking that your family could lose control of the business. With a plan, you choose who will own and control the business after you are gone.

10. Avoiding probate. Without a plan, your estate may be subject to delays and excess fees (depending on the state), and your assets will be a matter of public record. With a plan, you can structure things so that probate can be avoided entirely.

Well, it looks like there are more problems with using LegalZoom, according to Texas attorney Rania Combs. If you remember she had a great post about LegalZoom on her blog entitled The Problem with LegalZoom(And Other Do-It-Yourself Estate Planning Solutions). Well, apparently, LegalZoom was also paying attention. They corrected a few of the problems as it relates to Texas law in their documents.

In her new post entitled The Problem With LegalZoom (Part 2)- Inaccuracies Corrected But Problem Remains, she points on the biggest inherent problem with using LegalZoom, or any other Do-it-yourself approach to estate planning.  Look at the disclaimer.  Attorney Combs analyzes the LegalZoom disclaimer in great detail.

Some of the troubling language includes "the legal information on LegalZoom's website is not guaranteed to be correct or up-to-date" and "LegalZoom does not review your answers for legal sufficiency..".  Yikes!  

Attorney Combs ends her post with the conclusion that LegalZoom and all of the do-it-yourself options are a risky approach to completing your estate plan.  As a Michigan estate planning attorney, I concur.

Last Friday in Lansing, Michigan I attended an asset protection seminar that included planning for physicians. The presentation was part of the Michigan WealthCounsel forum which is organizing some of the top Michigan estate planning lawyers.

California asset protection attorney Jeff Matsen, Esq., was the key note speaker for the event. We covered keys that every Michigan business owner, professional, doctor, dentist and real estate investor need to know about asset protection.

We were instructed on a modular approach to protect wealth through a series of trusts and business structures. Through the training our Michigan asset protection law firm can help clients preserve and protect their business and personal assets through a sophisticated process of perfectly legal Michigan asset protection planning.

With Michigan Estate Planning, there are a few basic things that you need to know.

First, no matter what your net worth is, how much in assets you have, how much debt you have, you need an estate plan. In Michigan, once you turn 18 you are legally an adult. So, even if you're a college age adult who lives at home with your parents, there is a certain level of estate planning that should be done. That is you need, what our office calls, a disability plan. A disability plan plans for your disability or incapacity.  We would put together a Patient Advocate Designation (which is the Michigan equivalent to a health care power of attorney), HIPAA Authorization, and a Financial Power of Attorney that most likely would name your parents as decision makers and agents.

Now that we've established that if you're over the age of 18, you need the disability documents, the next step would be once you have assets (now matter how meager) or children, it is important to plan for your assets and children.  This is done through using Revocable Living Trusts and Last Wills and Testaments.  Whether you opt for a Living Trust based estate plan or a Will based estate plan will depend on your goals.  Remember a Last Will and Testament only gives instructions to the Michigan Probate court on how to administer your estate, it does not avoid probate.

Lastly, it is important to consult a Michigan estate planning attorney in preparing your estate plan.  Proper Michigan estate planning involves more than buying Nolo Willmaker software or reading the latest Suze Orman Trust Kit book.  It involves analyzing your goals and situation and using the estate planning tools we've discussed in the most effective and cost effective way.

What a mess Congress has created! We are now in a year where there is no federal estate tax - but hold the cheers. Congress has substituted another method of taxation that will collect more taxes from many of our clients and families than the estate tax. Additionally, as has been reported in the local and national press, these changes will, for some, greatly alter the planned for and anticipated distributions among family members and heirs.

A brief review of the law will help explain why this is so significant. The 2001 tax act, signed into law by President George W. Bush, gradually reduced the maximum rate of the federal estate tax (and the equally onerous generation-skipping transfer tax on transfers to grandchildren) from 55% to 45%. It also gradually increased the amount of property that you could pass free of federal estate tax from $675,000 per person in 2001 to $3.5 million per person in 2009. That means that with basic estate planning, a married couple could pass up to $7 million free of federal estate tax, if they both died in 2009.

Then, in 2010 only, the 2001 tax act repeals the estate tax. But like a horror film character who just won't die, under the existing law the estate tax returns again on January 1, 2011 - only at a much lower $1 million exemption and a higher maximum 55% tax rate! This strange "now it's gone, no it isn't" effect is the result of a rule in Congress that attempts to limit budget deficits.

Paying for Estate Tax Repeal

To pay for this one-year vacation from the estate tax, Congress replaced the estate tax with an increased income tax. Before 2010, any assets that pass to someone when you die would be valued at fair market value at the date of death. Thus after death, when a surviving spouse or heirs sold any assets (like securities or a home) that had increased in value, they would not have to pay income tax on any of that growth that occurred during your life. (This is referred to as a "step-up in basis.") For many heirs this means huge income tax savings, oftentimes tens of thousands of dollars or more. 

But in 2010 property that passes at death does not automatically receive this step-up in basis. Instead, each individual has a limited amount of property that can be "stepped-up" in value at the time of death. Property that does not receive this step-up value will be subject to tax on all increase in value from the date you first acquired the property. This means that the property could be exposed to tens of thousands of dollars of income tax liability for your heirs!
Not surprisingly, these rules are convoluted and in many cases very different from the old law. In fact, Congress attempted to institute a similar tax structure in the 1980s and it was repealed, retroactively, because it was too difficult to administer. Because of past experience as well as the anticipated difficulties in calculating such a tax, the common belief was that Congress would change the law before January 1, 2010. But it didn't. 

How You Are Affected?

This law can affect you in several ways. For married couples as well as single individuals, we need to first make sure that your property will be divided according to your desires, and not dictated by Congress. For more than 50 years it has been common to use a written mathematical formula to divide the assets of a married couple when the first spouse dies to maximize estate tax savings. Likewise formulas have been used to provide funds for charitable causes and to benefit family and friends. Now, in 2010 when there is no estate tax, these formulas will not work. If a spouse is not your sole beneficiary (for example, if you have children from a prior marriage), the existing formula could result in the disinheritance or substantial reduction of resources provided for the surviving spouse. 

What Should You Do?

As Michigan estate planning attorneys, we encourage you to meet with us as soon as possible to review your estate plan and make any changes that are necessary for this law. We need now to ensure that your property is positioned to receive the maximum step-up in basis increase available under current law. This is a time that demands a new approach to your planning with new thinking and building in flexibility to see that your wishes are fulfilled no matter what Congress will throw at us this year or next. We have solutions that will meet you planning objectives with the least amount of tax impact.

The Michigan House of Representatives passed a plan sponsored by Dian Slavens (D-Canton) that will create a protocol for investigating cases of elder abuse in Michigan. You can read the story at MichNews.org by visiting here: House Passes Slavens' Plan to Hold Elder Abusers Accountable.

I think this is an important step, as Michigan elder abuse has been a difficult issue for law enforcement to deal with.The plan looks to strengthen protections for seniors and increase penalties to anyone who physically abuses or financially exploits seniors.

Of the 200 that voted no in the House on making the Federal Estate Tax permanent, 26 Democrats joined all the Republicans present according to the Washington Post. Again, now it's up to the Senate with a December 31st deadline to take the issue by the horns. It will be interesting to see if the House's approach will be adopted by the Senate.

The AP is reporting that the House of Representatives just voted 225-200 to permanently extend the $3.5 million estate tax exemption.  Included in the bill is the portability feature, that will allow married couples to shield effectively double what the exemption amount is from the Federal Estate Tax.  Stay tuned.  Next up the senate.

Read the AP story here: Estate Tax Vote

Having money, fame, and fortune doesn't preclude you from making huge estate planning mistakes. These mistakes typically occur by either ignoring the need for estate planning, trying to do it yourself, or not reviewing your estate plan on an annual basis.

Forbes.com has a list of the top ten estate planning mistakes by celebrities. You can view the list here: Celebrity Estate Planning Mistakes in Pictures.

It looks like the House Democrats are looking for a 1 year fix to the Federal Estate Tax issue. As the law currently stands, at the end of this year, there will be an unlimited estate tax exemption. Then come 2011 and beyond, the estate tax exemption will be at $1million. Meaning anyone who passes away with over $1million will get taxed at 55%. Well the House Dems are looking to slap a band-aid on the estate tax issue by continuing this years rules into 2010.

You can read the article from www.nasdaq.com here: House Democrats to Ditch Permanent Estate Tax Bill for 1-Year Fix.

Talking to Loved Ones about What Really Matters

"The Holidays" can mean travel, excitement, gathering together with those you love, stress, conflict, and any or all of these things. 

We wish you the happiest of holidays.

We also urge you to take the time this holiday season to talk with those you love about what's truly important to you, and what's important for them to know.  Make sure you tell them that you love them.  Make sure you tell them about your estate plan, about where they can find your important legal and financial documents in an emergency, and who your important advisors are (e.g. estate planning attorney, financial advisor, accountant).  We understand that these conversations with family members can be difficult to start.  But they are important.  Talk to those you love about the legal, financial and health care decisions you have made, and take the time, while you still can, to explain your choices. 

Talking about your healthcare directives can also be a good lead-in to talking about your other personal and financial choices with those you love.  It's important -- for you and for them.  Take this extra step to ensure that everyone knows what you want while you can still answer questions and provide feedback.  And then eat a lot, have a wonderful time, and enjoy your holiday! 

Mention Legalzoom and Suze Orman's Will and Trust Kit and it raises my blood pressure a bit. Many attorneys and experts have spoken about the dangers of these products for unsuspecting consumers. Well, South Florida estate planning attorney, David A. Shulman, has added further evidence to the assertion that documents prepared by these "products" may not be the best for consumers.

In his blog he writes that the Wall Street Journal editorial page did a review of the two Online will packages and compared them. South Florida estate planning lawyer, David A. Shulman continues:

But there should be one and only one relevant question, and this is "Do the documents work?" In the event of her death, do the documents accomplish what she wants them to do, while minimizing taxes, protecting her heirs from creditors, and keeping administrative expenses and time and headaches to a minimum?

What's the idiot consumer's answer to that question?

"We didn't hire a lawyer to review them."

You can read David's entire blog post here: The Wall Street Journal Totally Blows it on Online Wills. I recommend you check out his blog, especially if you are looking for a South Florida estate planning attorney.