Objectives & Considerations in Estate Planning

How do you want your assets distributed?

The people who receive your assets are called beneficiaries. Key questions to consider:

• If any beneficiaries you have chosen do not survive you, who should receive those assets?
• Should distributions be made in equal shares?
• Do some of your beneficiaries have special needs?
• Do you want to give anyone specific items, such as family antiques or jewelry?
• Do you wish to include any charity or church?

Guardians & Conservators for Minor Children

If you have children under eighteen years of age, you need to name a guardian to care for them and a conservator to manage their financial affairs. An alternate guardian and conservator should also be named in case the first person named cannot serve.

Durable Power of Attorney

Should you have a durable power of attorney prepared? If you become incapable of handling your own affairs, you will need a trusted person — a spouse, relative, or friend — to manage your finances on your behalf. A durable power of attorney accomplishes this and avoids the necessity of a court proceeding to appoint a conservator.

Living Will

A Living Will allows you to direct the type of medical treatment you would like to receive in the event you are in a permanent coma or are terminally ill.

Choosing Your Trustee and Personal Representative

Your estate will be administered by your Trustee and/or Personal Representative. Their responsibilities include:

• Paying funeral bills and handling claims against the estate
• Selling assets and temporarily investing money during administration
• Preparing federal estate tax returns and fiduciary income tax returns
• Accounting for all assets and income received
• Distributing remaining assets to beneficiaries once all responsibilities are complete

Any adult U.S. resident may serve as Trustee and Personal Representative. It is helpful to appoint someone who is capable of keeping accurate records and has basic financial knowledge. Your first choice is typically your spouse. You should also name an alternate in case the primary person is unable to serve. If your family dynamics are complicated, a professional Trustee — such as an attorney, accountant, or bank with a trust department — may be a good choice.

Tax Implications

Federal Estate Tax

The federal estate tax is assessed against assets owned in your own name, assets held in trust, life insurance proceeds, and pension or retirement funds. Jointly owned assets are also taxed if you supplied the funds to make the purchase. For joint property owned by a married couple, one-half the value is included in the estate of the first spouse to die.

There is no federal estate tax on estates under $12,920,000 (2023 exemption). In addition, there is an unlimited marital deduction for property passing to a U.S. citizen spouse. A surviving spouse may also be able to utilize any unused exemption from their deceased spouse, known as the "portability" provision.

Michigan Estate Tax

Since October 1, 1993, Michigan has had an estate tax described as a "pick up" death tax — designed to equal the credit against state taxes allowed by the federal government as an offset against federal estate tax liability. Michigan has never had a separate gift tax.

Married Clients and/or Those with Minor Children

Common Accident Planning

Consider the possibility of an accident in which both you and your spouse die. State law provides that a person becomes an adult at age eighteen, meaning assets given to children are distributed at age eighteen regardless of the amount. Rather than distributing assets outright to a young child, it is often more prudent to delay distribution until the child is more mature. A trust can be set up for support and education, delaying division until all children have completed their education or reached a specified age.

Trusts for Children or Grandchildren

If you intend to leave assets to minor children or grandchildren, there are a few models:

• Separate trust — a dedicated trust for each beneficiary
• Common pot trust — a shared trust with rules governing each beneficiary's rights

Trust funds are typically available for health, education, maintenance, and support. When a beneficiary reaches the age you specify, they may receive additional income or principal from their trust.