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Frequently Asked Questions
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Here's a list of common questions. If you have one you'd like to ask, please e-mail me and I'll post it here.
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What is a Will?
What is a Living Trust?
Is a Living Trust Best For You?
What if I Die Without a Will?
Who Should be My Personal Representative?
What is a Will?
A Will is your written instructions to distribute your property at your death to those persons whom you wish to receive it. Your Will only transfers property that you own at the time of your death. That means it would not include property you own jointly with another (even a spouse) if that property is owned with survivorship rights. Having a Will does not avoid probate. A Will states who will receive your property. Probate is the process used to transfer the property. A Will also lets you identify who will handle the process after your death (a Personal Representative or Executor); who will take care of minor children (the Guardian); and allows you to set up a trust to manage property for those you identify (note that this type of trust does not go into effect until after your death).
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What is a Living Trust?
A Living Trust is an arrangement in which you transfer legal title of your assets to the trust, to be managed for the benefit of the persons named in the trust document as beneficiaries. The person creating the trust is usually the trustee until he or she dies, or becomes unable to manage the trust due to poor health or disability. At that time, a Successor Trustee takes over management of the trust. If you have a Living Trust, you also still need a Will. The Will is necessary to distribute any assets on your death that you may not have transferred to the trust, and to name a guardian for minor children.
A Living Trust can avoid probate; allow a successor trustee to manage your assets if you become disabled, instead of someone appointed by the court; limit the share your spouse receives of your estate; and simplify distribution of property you own in more than one state. Information about assets in a living trust is also generally not available to the public.
In some instances, the advantages of a Living Trust may be accomplished by other means, such as a durable power of attorney, bank trust account, or joint ownership.
Under certain circumstances, probate may present certain advantages over a Living Trust. For example, a Personal Representative may ask the court for supervision where questions arise. It is also advantageous in limiting the time in which creditors or heirs can file claims against an estate or challenges to a will.
In regard to privacy, a Living Trust may not have significant advantages over probate under a Will. Independent probate administration may be used in most circumstances. This does not require the Personal Representative to file an inventory of the assets of the estate, nor any annual accounts, and as a result, information on the deceased's assets are not made available to the public.
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Is a Living Trust Best For You?
In order to avoid probate through a Living Trust, you must transfer assets to the trust before your death. On your death, any assets remaining in your name and not in the trust must be probated. (This would not include property that is held jointly with survivorship rights with another person or where a beneficiary was already named.) Because you must transfer at least your major assets to the trust, a Living Trust is more complicated and time consuming to set up than a Will. Even if you are the trustee, when you handle your own business, you will do so as the Trustee rather than as an individual. In addition to transferring assets to the trust when the trust is set up, you must also transfer assets that you acquire later to the trust. These transfers are not necessary with a Will.
In addition, you should be aware that you will not save any taxes by setting up a trust, unless the value of your property is greater than the "Unified Credit" allowed by Federal Estate tax law. The "Unified Credit" is $2,000,000 in 2007, and will increase to $3,500,000 in 2009. If your assets are greater than the "Unified Credit" at the time of your death, there can be tax advantages in the creation of trusts, assuming the trusts are set up and funded properly.
Finally, people often believe that setting up a trust will result in one's heirs not needing an attorney and that the transfer of the assets will be simplified and quicker. That is generally not true. The property owned by the "trust" will still have to be transferred to the trust beneficiaries after the death of the original trustee. Generally, the time involved, complications and need for an attorney will be the same with or without a trust.
Is it worth the time and trouble for you to set up a Living Trust? In general, couples who jointly own their home and have few other assets may not need a Living Trust. On the other hand, if you have numerous or complex investments, real estate in more than one state, or want to leave your estate to persons who you do not believe could manage it on their own, or if the value of your assets are greater than the "Unified Credit," you may be a candidate for a Living Trust. The final answer to this question should be made after a thorough review of your estate and a discussion of your needs and desires with an attorney.
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What if I Die Without a Will?
If you die without a will, state law will determine how your probate assets will be distributed. In Michigan, if you are survived by a spouse and at least one minor child (under the age of 18), your spouse will receive only one-half of the probate assets, and your children will receive the other one-half (a deceased child's share will pass on to that child's own children).
If you are married and all of your surviving children are over the age of 18, or if you have no descendants, and a parent survives you, your spouse will receive the first $15,000 of the probate assets, plus one-half of the balance of those assets. The remaining probate assets will pass to your surviving descendants or parents.
Your surviving spouse will receive the entire probate estate only if you have no descendants or parents who survive you. If you have no surviving spouse, your descendants will receive all probate assets. Your siblings or more remote relatives will receive a portion of your probate estate if a spouse, parent or descendant does not survive you.
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Who Should be My Personal Representative?
A personal representative is the individual or institution named to handle the administration of your estate. It is not necessary to name a lawyer as a personal representative, but your personal representative should be a person who is capable of handling financial matters, maintaining detailed records and administering your estate.
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