When meeting with a client for the first time to discuss an estate plan, I usually go over the Michigan probate process. Many times, clients hear that it is important to avoid probate at all costs, and while I tend to agree with this sentiment for the most part, there are occasions where probate is the best choice for specific situations. A revocable trust is commonly the most popular method selected by clients for avoiding probate, but other alternatives do exist.
In Michigan, when anyone dies with a will or with no estate documents at all, that person’s estate will go through the probate court in the county where he or she lived at the time of death. Several court forms must be filed with the probate court to process the person’s estate, and one of these is the inventory form. On this form, the person responsible for handling the estate must include assets that were in the deceased’s name at the time of his or her death. An inventory fee is then calculated from that amount, which is roughly between three to five percent of the total value. This fee must be paid before the case can be closed and the estate distributed. This fee can be a significant sum of money depending on how much is on the inventory form. It is for this reason that most clients seek to do anything necessary to avoid probate. Below are a few of the other options clients take in lieu of a revocable trust:
Ladybird Deed
Unlike a trust where the home is usually owned by the trust itself, a ladybird deed allows the person to own the home throughout his or her lifetime. If the home is still in that person’s name at the time of death, the property then goes to someone named on the deed. Think of it as a beneficiary designation for real property. Instead of the land and home being probated, ownership then transfers to the beneficiary listed on the deed.
Joint Tenancy or Tenancy by the Entirety
It is also possible that real property can be owned by more than one person, as joint tenants or tenancy by the entirety. Joint tenancy involves two individuals owning property. When one of the joint tenants dies, the property is owned in full by the surviving joint tenant. This transfer of title is also called “right of survivorship.” Tenancy by the entirety also works in this fashion, although it is more commonly available to married couples. More than two people can also own property together, which keeps the land and home out of probate when one or more of the owners die. However, when the final surviving tenant receives the property, if he or she wishes to keep it out of probate, it is recommended that the home be put into a trust, a ladybird deed or a joint tenant added.
Bank Accounts
When it comes to money in bank accounts, such as savings and checking, so long as another person’s name is on the account, the money in that account will be protected from probate when one of the accountholders dies. Many clients choose to add their adult children or powers of attorney to the accounts, as they often take control over the funds in them prior to the parent dying. Bank accounts can also be designated as “payable on death” or “transferred on death” to another person, which means the account will go to that person as a beneficiary.
Beneficiary Selections
A large portion of most clients’ estates is wrapped up in retirement accounts and life insurance policies. These assets will pass outside of probate, but only if beneficiaries are listed on these accounts. Upon the death of the policyholder or account holder, the asset transfers to the beneficiary or beneficiaries listed. It is key, however, to have secondary beneficiaries lined up in the event your first beneficiary predeceases you. The risk you run by having only one individual listed as a beneficiary is that this asset will go through probate in the event no living beneficiaries exist.
At Sullivan Law, we offer estate planning packages at a flat and reasonable fee. We also offer free consultations to discuss what your needs are, what you would like to do, and how that can be best accomplished. Everyone’s needs are different, and your wishes should be clearly listed and understood. Sullivan Law is also a provider law firm through the Hyatt Legal Plan and regularly helps clients employed by many of the regional companies in the Greater Detroit area.
Call us at 248.917.1351 or email at asullivan@sullivanlawonline.com to schedule your free consultation today. We look forward to working with you!