If you’re like many people, the thought of your heirs waiting for up to a year to receive their inheritance might make you a little uncomfortable. That’s especially true if you have a spouse or dependent children who rely on your income and assets, since your death could leave those dependent loved ones without the resources they need to make ends meet. And while Michigan law does allow for the personal representative to release a so-called family allowance of as much as $18,000 to a spouse or dependent children, that is often insufficient to cover expenses if probate drags on for more than six to twelve months. To properly provide for family members, it is often advisable to consider how you can avoid Michigan probate court altogether.
Before you even consider any of the more complex estate planning options that could help you to avoid probate, it is important to understand your estate. Like other states, Michigan does not require every single estate to pass through the probate process when someone dies. Instead, the state has a shortcut process that can be utilized for small estates to help them avoid the costs and time delays probate can often entail.
If your assets are no more than $15,000 in value and your estate contains no real estate holdings, then your heirs may be able to forgo the probate process by preparing an affidavit in which they declare that they are entitled to certain assets. Unlike formal probate, that process only has a 28-day waiting period. There is also a simplified probate procedure that can be used in many instances. The executor can ask the court to use that process when the value of the estate is $15,000 or less, or when the estate value is less than the family allowance, administration costs, funeral costs, and certain other expenses.
If Shortcuts Aren’t available
Of course, those options aren’t available for many estates. If your estate is large enough that it fails to qualify for simplified probate or contains assets that prevent it from being settled with an affidavit, your heirs may have no choice but to endure a lengthy probate process. Unless, of course, you take affirmative steps to avoid that eventuality. The good news is that there are things you can do to protect your estate from probate.
Payable-on-Death Designations: Michigan allows you to use payable-on-death designations with your various bank accounts and CDs. Basically, this designation allows you to designate a beneficiary who will receive ownership of the account when you pass away – without undergoing the time-consuming probate process. Instead, that beneficiary claims any money in the account by dealing directly with the bank. Without this type of designation, that account would need to wait for probate before your heirs could ever gain access to any benefit from the money.
It is important to note that this type of designation has no impact on control over the money in the account while you are still alive. That designee cannot access the funds in any way until you die. Moreover, your use of a payable-on-death designation does not mean that you even have to leave money in the account. You are still free to spend all of it if you so desire. The POD designation merely provides a mechanism for the east transfer of any money residing in your account after your death.
Transfer-On-Death Registration: If you have stocks or bonds, you can use a transfer-on-death registration to name an heir for your brokerage account. Like the POD, this option allows you to register your account using a beneficiary form that ensures that your entire brokerage account passes to your named heir when you die rather than passing through the probate process.
Joint Ownership: Michigan provides two options for joint ownership of property. The first is joint tenancy, and is used by couples that jointly own everything from real estate and automobiles to bank accounts. When one of those owners dies, the property passes automatically to the survivor. The second option is similar to joint tenancy, but is reserved for married couples. It is called tenancy by the entirety. In the state of Michigan, any joint tenancy involving a married couple is referred to as tenancy by the entirety.
Living Trusts: You can also choose to use trusts to avoid the probate process. The living trust can be used for just about any type of asset you can imagine, and enables you to ensure that the assets in the trust are distributed to heirs without any need for probate court involvement. Trusts offer a wide range of benefits that can extend well beyond probate avoidance, and some can even be created in a way that allows you to maintain control over those assets while you’re still alive.
To accomplish that feat, you should use the living trust. That requires the creation of a trust document, and the transfer of assets to the trust. To maintain control over those assets, you simply name yourself as the trustee, and name a successor trustee to take over when you die. It is even possible to name yourself as beneficiary, while also listing other beneficiaries who will receive your assets when you pass away. As you might imagine, though, the creation and funding of a trust can be a complex legal matter. To do it correctly, you should always rely on experienced trusts attorneys.
Rely on Us!
At Biddinger & Estelle, PC, you can rely on our estate planning experts to help you properly evaluate your estate and determine the best options for your probate avoidance needs. We can let you know if your estate is likely to require probate, and assist you in weighing the advantages and disadvantages of that process for your unique circumstances. If you’d like to learn more about how we can help you ensure that your estate doesn’t create unforeseen complications for your heirs, contact us at our website today or call us at (989) 872-5601.