HOW TO FIX SIX COMMON ESTATE PLANNING MISTAKES
HAVE YOU MADE ANY OF THESE MISTAKES?
Mistake #1: Not protected your children’s inheritance when you marry again.
If you die before your spouse, your current plan likely gives the bulk of your assets to your spouse. Your spouse has the power to change your plan and leave nothing to your children. He or she might remarry. Upon the death of your spouse, Michigan law automatically gives over $150,000 to the new spouse as a minimum share if we take no steps now to stop it. Your spouse may also be subject to attack by criminals and cheats who would take advantage of age and grief. Many predators are currently selling annuities which tie up all the cash for 10 years with large penalties for early withdrawal. Thieves can also use reverse mortgages to take the home from unsuspecting widows and widowers.
We have documents and procedures that can replace these concerns with peace of mind.
Mistake #2: Failed to have a business succession plan.
Many business owners are so involved in running their business and making a living that they fail to provide for management of their business in the event of disability or death. We make sure your business goes to the right people if someone retires or dies and that the family of the former owner is compensated. Do you really want your deceased co-owner’s son or wife as your new business partner? A buy-sell agreement can prevent this.
We work with you to create a retirement and business succession plan. This makes sure your lifetime of hard work results in the best value for you and your heirs.
Mistake #3: Assumed that wills avoid probate
Many people think that wills avoid probate. They do not. If you die with assets in your name alone, they have to be probated even if you have a will. If you die with assets in your name alone and without a will, Michigan law gives your property to your closest relatives. Often, these are not the persons you want to receive anything. In some cases property could even go to your brother-in-law! We will review this list as it pertains to your family during your conference. You will have the opportunity to change this list if you choose. We will discuss other ways to hold assets to avoid probate.
Mistake #4: Made your stocks or home joint with your children.
Joint ownership can result in hidden income taxes and make your assets available to your child’s creditors and spouse in the event of divorce. Upon your death a joint tenancy does avoid probate just as you planned but the child must pay an income tax on the gain which is calculated based on your original cost of the house or stock.
Example A: Your house and lot cost $50,000 in 1965. You put in $20,000 of improvements. Your adjusted cost basis is the total, $70,000. After your death your child as surviving joint owner sells the house for $220,000.
Sale Price |
$220,000 |
Cost basis |
- 70,000 |
Taxable Profit |
150,000 |
|
|
Income Tax |
$22,500 |
However, if one of our planning methods were used, your child's cost basis would be "stepped up" to the value of the property on your date of death and little or no tax would be owed.
Example B: Same facts as above but tax-saving plan signed:
Sale Price |
$220,000 |
Stepped up cost basis |
- 220,000 |
Taxable Profit |
NONE |
|
|
Income Tax |
NONE |
We will discuss ways how to fix these problems and still avoid probate.
Mistake #5: Ignored nursing home costs in your plan.
Most traditional estate plans fail to provide for a stay in a nursing home. After one to four months of coverage under most medical insurance plans, many families are surprised to find out that they need to pay the entire cost of about $6,000.00 per month out of family savings. Most people spend the family money and investments down to $2,000.00. Instead, we can help make sure assets are in the right name and exempt them from being counted by Medicaid. Some gifting is still allowed under Michigan law. We can explain a series of steps you can take to maximize your benefits under Medicaid and legally save money for your family.
Mistake #6 Allowed your children to receive their inheritance at age 18.
Most children are not ready to manage a large or even moderate inheritance at age 18. But that is the age Michigan law requires conservators to turn money over without any protection or guidance. We have tools to protect minor children and teach them how to manage finances. We use several methods to assure that they will not receive the assets until they are old enough to control them wisely.
PLEASE CALL 248-886-8622 FOR YOUR
FREE ANALYSIS TO FIND ANSWERS TO THESE CONCERNS
