When most people hear the words “estate planning,” they have an instinctual reaction: “I don’t have to worry about that. That’s something older, richer people do.”
Part of this might come from the name itself. The word “estate” makes people imagine a big gleaming mansion with a wrought-iron gate, so lots of young people think, “Why would I need to worry about my estate? I’m no millionaire!”
Despite the fancy-sounding name, estate planning isn’t just for the rich and retired. Every adult has an estate, and every person can benefit from planning what they want to happen to their estate after they die.
What Is My “Estate,” Anyway?
As far as the law is concerned, your estate is simply everything you own, either by yourself or jointly with someone else.
Your estate includes your:
- Bank account balances
- Real estate
- Securities (stocks and bonds)
- Retirement accounts
- Personal property (jewelry, clothing, furniture, musical instruments, etc.)
Your estate also includes any interest or money that you’re entitled to, such as insurance proceeds and dividends from stocks and bonds.
Why Do I Need an Estate Plan?
The easiest way to answer the question of why you need an estate plan is to answer another question: What happens if you die with no estate plan in place?
If this happens to you in Michigan, the state will basically create an estate plan for you based on existing laws, which means you’ll get a “one-size-fits-all” estate plan that doesn’t account for any of your unique circumstances or your wishes. The state will simply use guidelines established by law to find a living beneficiary or beneficiaries and divide your property among them. These guidelines are based on what the state has decided the average person would most likely want.
RELATED: 5 Estate Planning Questions for Grand Rapids Families
If you wanted to make special stipulations about who gets what after you die, but you pass away before creating an estate plan, then you and your loved ones are out of luck. For example, if you want to leave your children extra money for their education or you decide you don’t want your spouse to inherit anything because you’re planning to divorce, the state won’t account for any of this.
In addition, your estate will have to pass through probate, which can be an expensive, public, and time-consuming process for your loved ones. If you want to avoid this, you’ll have to work with a lawyer to create an estate plan specifically designed to avoid probate.
The Fundamental Estate Planning Document: A Will
A will is the most basic estate planning document, and it’s one that every person should have in place. A will can handle lots of estate planning functions, including:
- Naming the person you want to act as executor of your estate
- Settling who gets what in terms of your assets and property
- Naming a guardian for your children
If you’re a younger person with a small estate (a single small house, a car, not much valuable personal property), then a will might be able to address all your estate planning needs.
However, there some things a will can’t do. In particular, it won’t help your loved ones avoid probate, and it also can’t transfer certain types of property and accounts. An experienced estate planning lawyer can help you figure out whether a will can meet your needs. If it can’t, a trust might be the best option for you.
Living Trusts: A Valuable Estate Planning Tool
A trust is a legal arrangement that lets a third party (a “trustee”) hold your assets on behalf of the person you want to receive them (the “beneficiary”). The trustee must manage and distribute the assets according to your instructions.
While a will only goes into effect when you die, you can use a trust to manage your property and assets while you’re alive, which is why it’s properly called a “living trust.”
One of the best parts about a trust is that it can let your estate avoid probate. Instead, the trustee simply pays your debts and then distributes the remaining assets according to your instructions. This can happen within a matter of weeks, while the same process often takes months or even years with a will.
Trusts have many other benefits, too:
Trusts provide privacy.
A will goes on the public record after you die. This isn’t the case for a living trust, which means you can use it to distribute your estate in private.
Trusts give you more control over what your loved ones can do with your money.
When you create a trust, you can set specific conditions for the beneficiaries. For example, you could set aside $50,000 for your son or daughter with the stipulation that they can only use it on education or starting a business.
Trusts can handle unique situations.
You can set up a trust specifically to care for a child with special needs, for example. Some people even set up trusts to provide care for their pets.
While a trust can serve lots of important functions, it’s important to understand that it doesn’t replace a will. A trust can only control the assets you’ve transferred into it, which means you should have a will in place to cover the assets you haven’t transferred into your trust, either because you didn’t want to or because you haven’t had the chance yet.
In addition, Michigan law doesn’t allow you to use a trust to name a guardian for your children. Only a will can serve this function in our state.
While trusts have lots of benefits over a will, creating one is a more complicated and involved process, and you’ll want help from an experienced estate planning lawyer if you decide to do it.
Contact Law Offices of Kari Santana for Help Planning Your Estate in West Michigan
Whether you’re established and have a large, complex estate or you’re young and just getting started, the experienced estate planning team at Law Offices of Kari Santana can help you get ready for the future with our affordable estate planning services. We understand that your estate planning needs are as unique as you are, and we’ll address them with creative, custom-tailored solutions that can give you confidence and peace of mind.
To get started today with a free initial consultation, call us at (616) 717-5759 or fill out our quick and easy consultation form below.
The content provided here is for informational purposes only and should not be construed as legal advice on any subject.