Summary of Estate Plan

During Lifetime:

• Your Trust is a Revocable Living Trust. This means you may transfer assets into your Trust during your lifetime in order to avoid probate of those assets on your death. Assets are transferred into trust by titling them in your name as Trustee. Revocable means you may change the trust terms in any way at any time, and use the trust assets any way you want, any time you want.
  
• You are the Trustee, or have the power to retain, or discharge a third-party trustee. Trust assets are administered and distributed by you, or as you request.
  
• If you become incapacitated, assets are administered and distributed for your benefit.
  
• Gift programs may be continued.
  
• The trust does not protect you from your creditors, nor does it protect, or shield assets for Medicaid eligibility purposes.
  
• The Trust does not have a separate taxpayer identification number until you die or discontinue acting as Trustee. You use your (or your spouse’s) social security number and report items of income and expense on your personal tax return.
  
• If you are a married couple and your trust is a “joint trust”, in most cases, all of the above will continue to apply until the second death.

After Your Death

• Debts and Taxes are generally paid from the estate assets (unless you have specifically directed otherwise).
  
• If your Trust contains credit-shelter/marital deduction provisions, ¹ the trust is divided into a marital share and a residuary trust. ²  The marital share is commonly paid out to the surviving spouse. The residuary share provides lifetime annual income and discretionary distributions from principal to the surviving spouse. Each plan is different and these specific provisions may vary significantly from plan to plan. This will have been discussed with the client(s) prior to execution of the plan documents.
  
• Otherwise (or after the death of the second spouse), the trust provides for payment of final expenses and distribution to designated trust beneficiaries.
  
• If trust beneficiaries are minors, the trust provides that their share is to be held, invested, and administered for the benefit of the minor(s) for their education and support, until a stated age.

• The Will has limited function, and is only effective in probate court.
  
• If all of your assets are titled in your name as Trustee during your lifetime, no probate will be necessary. This underscores the importance of “funding” your trust.
  
• The Will nominates guardians for your minor (and possibly disabled) children.
  
• If any asset is not titled in your name as Trustee and does not have a joint owner or beneficiary, probate will be necessary for that asset(s). The Will provides that any assets which inadvertently end up in probate “pour over” to your Trust. This ensures appropriate distribution and use of the trust’s tax planning features.
  
• Assets such as life insurance, retirement plans, IRA’s and annuities pass without probate to the designated beneficiary, regardless of what your Will or Trust provides. These assets can (and often should) be directed to pass through the trust.
  
• The Personal Representative named in your Will is responsible to handle probate and is most often the same person (or entity) as your successor Trustee.

General Durable Power Of Attorney:

• The Durable Power Of Attorney avoids probate proceedings (Conservatorship and/or Guardianship) by naming an agent who may act for you without Probate Court supervision if you become incapacitated.
  
• The Agent’s powers under a Durable Power Of Attorney are only good until your death.
  
• The Durable Power Of Attorney is generally not conditioned on your disability (in order to avoid the Agent having to prove your incapacity). However, it can be drafted to require proof of incapacity before becoming effective (known as a “Springing” Durable Power of Attorney).

Healthcare Durable Power of Attorney (“Designation Of Patient Advocate”):

• Names an Agent to make medical/healthcare decisions. This may be a different agent than the agent under your General Durable Power of Attorney.
  
• Under Michigan Law, this power is only effective on a showing of incapacity (“springing”). The statute requires that incapacity be certified, in writing, by two or more physicians (or similarly qualified health professionals).
  
• Your document contains provisions which authorize your patient advocate to withhold or withdraw extraordinary treatment in certain instances. This provision is similar to what is known as a Living Will. ³  You should review these provisions carefully and discuss your wishes with your Patient Advocate.

• “Funding” is the process of titling assets in your name as Trustee. ⁴
  
• Deeds: Generally, we have prepared “quitclaim deeds” ⁵   transferring your real property into your name as trustee(s).  Often, we will instruct you to hold them without recording them. Because you are the transferor and transferee, the deeds have been delivered and may be held unrecorded, until a later time, at the convenience of the trustee (usually after a death has occurred). This will avoid having to record the Trust and take other administrative steps each time there is a new mortgage, sale, etc. of the property.
  
• General Assignment: Personal property has no title documentation, and the purpose of the General Assignment is to convey such items to the trust. If you have left a written memorandum of personal property distribution, the Trustee will be bound by it.
  
• Joint Declaration Of Trust Ownership: In very limited instances you may have executed one of these. This document is a complex, “agency” document which is intended, mainly as a “stop-gap” measure until funding is completed.

¹ Generally, married couples with estates which exceed the federal estate tax exemption equivalent.

² Generally called a family share, a credit-shelter trust, or a bypass trust.

³ Michigan does not currently recognize a “Living Will”, but the courts have said that if a clear written statement of intent is left, it will be given deference.  The “living will” language in the Patient Advocate Designation should suffice as a clear written statement.

⁴ See separate Funding Instructions.

⁵ "Quitclaim" merely means you are conveying or transferring whatever interest you have in the property.  Generally, you have acquired the property by means of a Warranty Deed (often accompanied with Title Insurance, or an Abstract and Opinion of Title), and so, know that you have title.  A Quitclaim deed is simpler and requires no title insurance, opinion, etc.

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