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COMMON ESTATE PLANNING ALTERNATIVES – AND WHY YOU SHOULD NOT USE THEM

by | Aug 11, 2017

Many people defer on doing anything estate planning-wise, as they do not like to think about the prospect of death, particularly their own death.  In the end they die “intestate” (without a will), or they may have taken some interim steps to dispose of some of their assets, in an ad hoc fashion.  This article will address some of these common strategies and  highlight some of their pitfalls.

BANK ACCOUNTS:

One of the most common strategies is to place the names of one of more of your children on your bank savings and checking accounts.  In this fashion, the monies in the account will, by operation of law, automatically vest title of the funds on hand at the time of death in the survivor(s) whose names appear on such account(s).  However, in many cases, only one or two of the children are placed on the account with mom or dad.  As the account then belongs to the survivors, the issue then arises as to whether their names were placed on the account solely for “convenience” purposes , so as to allow those children to assist mom or dad with their banking, or was there in fact an intent to make such children a gift of the monies in the account at the time of death.  Much litigation (and a tremendous amount incurred for legal fees) has arisen over this question.  As the laws of the State of Michigan state that there is a presumption the funds in the account belong to the parties named on the account as “joint tenants”, and thus would go to the survivors whose names appear on the account. It is only through rebutting this presumption by clear and persuasive proof to the contrary (usually through litigation in the Probate Court) that you overcome it.

Another issue that may arise when others have been named as joint owners of a bank account is creditors’ claims as to such individuals.  If a son or daughter owes money to creditors and they obtain a judgment against him or her, they could then garnish such joint bank account and take out half if not all of the monies on hand.  If that same individual had to file bankruptcy, then the Trustee appointed in the case would likely make a claim for all or at least half of such funds on hand, even though they may all have been contributed by mom or dad!   Again, it may take timely and costly litigation to deal with such claims, with no clear result. The professionals at Damon, Ver Merris, Boyko & Witte, PLC can assist you in making these decisions.

REAL ESTATE:

A very common way to deal with real estate is the so-called “deed in the drawer”, also known as the “poor mans will”. A person in this instance simply deeds his house or other real estate to one or more of his children, and then sticks the deed in a drawer to be found and recorded later.  The problem with this is that the deed may never be discovered or is later lost or destroyed.  Even if the deed is found, and subsequently recorded, there may be questions as to “delivery” of the same to the grantee which, while presumed, may be an issue if not all of the other kids are included on the deed.  Further, if the deed is subsequently recorded and it results in an uncapping of the real property taxes, typically because the grantee(s) are not of a certain relationship to the deceased grantor, then the local assessor can uncap the taxable value for such real property back to the date of the deed and assess higher real estate taxes (and penalties) going back several years.

PERSONAL PROPERTY:

Quite often mom may say “I want my daughter to get my wedding ring when I am gone”.  Or dad may want to give a shotgun to one of his sons.  All this is done orally and problems then arise when mom or dad is gone as to who is to get what.  Even if this is put into some type of list, unless it would qualify as a will or will substitute, it may not have any legal effect.

MOTOR VEHICLES:

Sometimes an individual will put the name of his son or daughter on the  title to their car.  This is all well and good as long as there is no accident in the meantime or, again, the child does not have creditor problems.  However, if there is an accident the child could very likely be named as a defendant in a lawsuit.

ALTERNATIVES:

For bank accounts, you may want to consider a “Pay on Death” designation (although this will not help with your children’s creditors’ claims if they are also named on the account as an owner).  You could also look at having a so-called “Lady Bird” deed drafted, that will dispose of your real estate at the time of your death, but leave you in complete control of such property until then.  The deed is then immediately recorded, but any transfer does not take effect until you are gone. There are generally no real estate tax uncapping or penalty issues. As to personal property, the best thing to do is to make out a list of what is to go to whom and sign and date it (and preferably attach it to your will or trust agreement, if not stated in the document itself).  As to titled vehicles, such as a car, boat or trailer, these are easily transferred through the Michigan Secretary of State upon presentation of a death certificate by a responsible person.

While these are stop gap measures, these best thing to do is to meet with an experienced estate planning attorney and have your affairs put in order, in a proper fashion, through the drafting of an enforceable Will or Trust Agreement.   You have worked hard all of your life in order to be able to live a lifestyle of your choosing and to accumulate various assets.  Why not spend a little of that well earned money to prevent possible future fights (and family disharmony)  and make sure  your property goes where YOU want it to go, not where someone else says it should go ?  If you need help with your estate plan, please contact the experts at Damon, Ver Merris, Boyko & Witte, PLC; we are here to help.  – Larry A. Ver Merris / August 11, 2017

While this posting originates from a law office, none of the contents should, in any way, be considered legal advice. If you have not signed a retention letter describing the legal services to be provided and the amount to be paid for such services, you are not a client of this firm.

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