Will vs Trust In Michigan
Why The Wrong Choice Could Cost You...
Have you been looking for answers to the following questions about Will vs Trust in Michigan:
Which is better, a Will or Trust?
What’s the difference between a Living Trust vs a Will?
Do I need a Will or a Living Trust?
How do I avoid Probate in Michigan?
What’s the average cost of setting up a Will and Trust?
Do I need the help of an Estate Planning Attorney?
If so, you’re not alone. These are common Estate Planning questions that Michiganders spend countless hours researching, asking friends, and scouring the internet looking for answers… until now! In this article we’ve compiled the answers to these questions for you based on our extensive Estate Planning experience at Rochester Law Center advising 1,000s of families on Wills, Trusts, and Estate Planning in Michigan.
Wills vs Trust In Michigan: An Overview
When most Michigan residents begin thinking about how to plan for their family’s future after they pass, a Will is usually the most common option they think about first. But what many people don’t know is that Wills have shortfalls and potentially expensive, unintended consequences that may actually hurt their family. Last Will and Testaments and Living Trusts are the two primary methods of passing on your assets and providing for your family after you pass away. Each distributes property according to your wishes, but have distinct differences that you need to take into consideration when creating your Estate Plan…
The Critical Difference Between A Will And A Living Trust In Michigan
The most important difference between a Will and a Living Trust in Michigan is that a Will requires you to go to Probate Court before it takes effect. There are 3 main reasons why this is important to you…
1. Probate can be expensive...
Probate is the legal process through which the court ensures that, when you die, your debts are paid and your assets are distributed according to Michigan law. It can be very expensive. Legal fees, executor fees, inventory fees (county taxes), and other costs have to be paid before your assets can be fully distributed to your heirs. If you own property in other states, your family could face multiple probates, each one according to the laws in that state. These costs can vary widely, but we’ve had clients who had to pay tens of thousands of dollars throughout the Probate process. In general, Probate is much, much more expensive than doing some simple Estate Planning in advance.
2. Probate can take a long time...
It takes a long time… In Michigan, the standard probate process takes a minimum of 5 months to complete. However, over the past decade we’ve experienced that it generally takes 9 months to a year to resolve simple cases (and several years for contested cases). We once represented a client whose Probate lasted for 8 years!
3. Probate is public...
Your family has little privacy in probate court. Probate is a public process, so anyone can see the size of your Estate (often what you actually owned), who you owed debts to, who will receive your assets, and when they will receive them. The process invites upset heirs to contest your Will and can expose your family to lawsuits from greedy creditors and potential fraudsters.
How Do I Avoid Probate In Michigan?
When analyzing a Will vs Trust, this is an important question. A Living Trust can help you avoid Probate in Michigan, but a Will cannot. A Living Trust is a private document which does not require any court intervention. Most Living Trust transfers take place in the privacy of your attorney’s office shortly after a death. This is usually a much faster, easier, less expensive, and less stressful process then going to Probate Court. A Trust also gives you the ability to keep wealth transfers private; avoid taxes, court fees, and legal costs; reduce the risk of legal challenges; protect family assets; and control when, where, and how your money is distributed to your family.
Additional Benefits Of A Living Trust vs A Will
Protect Your Family From Creditors, Divorce, Substance Abuse, Gambling and Estate Taxes
Many people are unaware that you don’t have to distribute your entire Estate immediately after death in the State of Michigan. Using a Living Trust, for example, you can hold off on distributions until certain requirements are met, which is ideal for those with minor children, family members with disabilities, or beneficiaries with addiction, gambling, or creditor issues. You can decide whether the funds should be divided into monthly payments, or predetermined percentages based on age or milestones. You maintain complete control over how and when beneficiaries will receive their inheritance.
Some clients are concerned that their children’s spouse might try and take the inheritance in a divorce, or that the inheritance might be used to support a drug or alcohol addiction. Again, a Trust is a good way to control the flow of money and use if for the benefit of a child without risking its misuses. A Trust can even be used to preserve a beneficiaries access to needed government benefits like Medicaid.
As an example, we once represented a client who was in charge of managing his father’s Living Trust. Our client’s sister was the beneficiary, and as luck would have it, she was awful with money. Her creditors were breathing down her neck, and she needed to declare bankruptcy. The inheritance would have been devoured by the creditors or swept into her bankruptcy filing had the Estate Plan forced us to make distributions immediately. Instead, the Living Trust allowed us to wait until after the sister had discharged her debts in the bankruptcy court before making the payment. She ended up with roughly $800,000 more than she would otherwise have received!
A Living Trust can also help you achieve tax benefits that a simple Will can’t. Living Trusts allow for savings on Estate Taxes and can minimize the burden for larger estates. A provision can be included in the Living Trust that allows the creator of the Living Trust to use their tax exemption or, if married, both spouses’ exemptions and save significant amounts in federal estate taxes.
What's The Cost Of Setting Up A Trust?
Cost is another factor to understand when looking at a Will vs Trust. Living Trust Planning is much less expensive than Will Planning in the long run. The AARP did a study of Probate fees to discover that attorneys earn $1.5 Billion a year from Probate fees with millions of more dollars going to bonding companies, appraisers, and the courts. Probate often eats up to 5-10% of your Estate (house, investments, additional properties) – which can be tens of thousands of dollars or more. For smaller estates, that percentage can be much, much higher. We’ve seen many situations where the Probate process leaves nothing behind for the family. Keep in mind, a Will won’t help you avoid Probate – it’s actually a guaranteed ticket to Probate. This is far more common than you might think and much more costly than completing your Living Trust before it’s too late.
Do I Need A Lawyer For A Will Or A Trust?
We had a client whose brother downloaded a “Do-It-Yourself” Will off of the internet. Unfortunately, he never had the “Will” reviewed by an attorney and it wasn’t considered legally valid when he passed away. Unsure of what to do in this situation, the client came to us to help him navigate the complex Probate process. It took 3.5 years (and $10,000s) fighting off legal challenges trying to prove his brother’s intentions to the court. Most online “Will Factories” that offer these types of forms rarely mention this. As part of the Probate process we were forced to declare his assets to the court. When creditors and estranged relatives saw the size of the Estate, the claims against his Estate started flowing like a waterfall. Even worse, his brother had never updated his life insurance. The ex-wife, whom he had not spoken to in years, received a multi-million dollar payday. What was left of the Estate was gobbled up by filing costs, legal bills, and “inventory fees” (a fancy word for taxes). Almost nothing was left for the man’s family members that he had attempted to leave his assets to. Sadly, this is an all too common scenario.
Find Out What's Best For Your Situation
The Estate Planning Process varies greatly from person to person and from family to family. It can seem very complex at the beginning. But to avoid a scenario like the one you just read, it’s usually best to start by talking to an experienced Estate Planning Attorney.
Over the past decade at Rochester Law Center we’ve helped 1,000s of Michigan families Estate Plan with Wills and Living Trusts. We provide complimentary free consultations to Michigan residents who have additional questions about Estate Planning based on their unique situations. If you’d ever like to talk about your family’s particular concerns, feel free to give us a call to reserve your free consultation at (248) 613-0007. We’d love to help you!
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Written By Chris Atallah - Founder, Rochester Law Center, PLLC
Written By Chris Atallah - Founder, Rochester Law Center, PLLC
Chris Atallah is a licensed Michigan Attorney and the author of “The Ultimate Guide to Wills & Trusts – Estate Planning for Michigan Families”. Over that past decade, Chris has helped 1,000s of Michigan families and businesses secure their futures in all matters of Wills, Trusts, and Estate Planning. He has taught dozens of seminars across the State of Michigan on such topics as avoiding the death tax, protecting minor children after the parents’ death, and preserving family wealth from the courts and accidental disinheritance. If you have any questions, Chris would be happy to answer them for you – just call at 248-613-0007.