Legal Blog

Why Should You Have A Trust For You & Your Loved Ones?

Many Americans completely misunderstand trusts. However, in the right circumstances, they can offer significant benefits to those that use them, especially when it comes to protecting the assets of the trust from the beneficiaries’ creditors.

Trusts can be incredibly complex, but their implications are always in the headlines. Read on to learn about the subject in a simplified manner and explain how trusts protect the creator as well as their beneficiaries.

Trusts are many different types, so the only ones discussed here are the two most common varieties. It is important to find an estate planning lawyer if you have questions about specific types of trusts or how you can apply the concepts to your situation.

Irrevocable Versus Revocable Trusts

Trusts are two basic types: irrevocable trusts and revocable trusts. Revocable trusts are the most common and are fully revocable at the request of the creator. The creator retains control over the assets transferred to a revocable trust and can revoke the trust and have the assets returned. Irrevocable trusts are not revocable by the creator. Revocable trusts, however, don’t offer the trust maker or creator asset protection.

Asset Protection for the Creator

Asset protection planning is designed to protect assets that are otherwise subject to creditors’ claims. A creditor can reach assets that a debtor owns but cannot reach assets that the debtor does not own. This is where a trust comes in.

If a trust creator makes an irrevocable trust of which he or she is a beneficiary, any assets transferred to that trust are not protected from the creditors of the creator. The rule applies regardless of whether the transfer was done to defraud existing creditors or not.

Until recently, a trust creator was required to establish the trust outside the U.S. to remain a beneficiary of the trust while still retaining protection against creditors for the assets of the trust. However, several states now allow domestic asset protection trusts.

In Utah, South Dakota, Rhode Island, Delaware, and Alaska, a trust creator can transfer assets to an irrevocable trust and still be a beneficiary of the trust. However, this does not work if the transfer was done to defraud creditors.

Asset Protection for Beneficiaries of the Trust

Revocable trusts don’t offer any asset protection for the trust creator during his or her life. However, upon the death of the creator, the trust becomes irrevocable as to the deceased trust creator’s property and can offer asset protection for beneficiaries with two key caveats.

–    The trust must retain ownership of the assets to continue offering asset protection. If assets are distributed to the beneficiary, they are no longer protected.

–    The more the rights a beneficiary has with regards to compelling trust distributions, the less the protection the trust offers since creditors can compel a distribution from the trust.

If asset protection is a significant concern, the trust creator should not give the beneficiary the right to automatic distributions. A better approach would be discretionary distributions by an independent trustee.

Final Thoughts

It is possible to protect assets from creditors by putting them in a properly drafted trust. You can protect beneficiaries from the claims of creditors by keeping the assets in a trust over the lifetime of the beneficiary. Working with wealth planning professionals ensures that your planning is in line with your objectives and goals.

Schedule Your Free Consultation with Our Michigan Experienced Estate Planning Attorney

Einheuser Legal, P.C. is an estate planning law firm in Bingham Farms, Michigan. We help families set up wills and living trusts. Attorney Michael Einheuser is an experienced estate planning lawyer serving residents in Bingham Farms, Troy, Farmington Hills, Rochester Hills, Southfield, West Bloomfield Township and Bloomfield Township.

Schedule your free consultation today by calling 248-398-4665.

Important Considerations Before Loaning Money To A Family Member

People typically lend to family members for various reasons. For instance, lending your daughter money so that she can start a new business or lending money to your son so that he can buy his first home. You might find yourself in such a situation at some point. It is thus important to understand how this might affect you from a tax perspective.

If you are planning to charge the borrower interest on the loan, you are required by law to pay income tax on the interest collected. The IRS expects you to charge interest when you lend money just as a bank would in spite of the fact that the recipient is a family member.

Bearing this in mind, the IRS has set an Applicable Federal Rate (AFR) which varies based on the term of the loan as well as the month. If you visit the IRS website, you will find a list of Applicable Federal Rates, by the month. If you fail to charge interest on the loan, the IRS regards it as a “gift loan,” which means that special rules will come into effect.

Loans of less than $10,000 between individuals are typically disregarded. If you do charge interest but less than the AFR for loans between $10,000 and $100,000, the difference will be considered a gift for which you are required to pay a gift tax for should your total annual gift tax exceed 14,000.

If the loan is more than $100,000, the IRS will consider the foregone interest a gift and will also assume automatically that you received the foregone interest as an interest payment, which means that you will be required to pay income tax on the money.

For example, you lend your son $150,000 in a 5-year interest-free loan with a 2.85 percent AFR, the IRS will assume that you have been receiving interest amounting to $4,275 each year. You will subsequently be required to pay income tax on the amount each year. If you are a person with a combined 40 percent state and federal income tax rate, the net effect would be $1,710 in extra taxes each year.

However, it is possible to get around this, like using an Irrevocable Trust. You can set up your Trust such that any transactions between the Trust and yourself are not regarded as income. For this reason, if you lend the Trust $150,000, the IRS would only ignore the foregone interest when it is calculating tax liability. The foregone interest can still be regarded as a gift, but it is possible to design the Trust so that a gift to the Trust is considered to be a gift to a family member. The annual gift tax exclusion has been stuck at $14,000 since 2014.

The Bottom Line

If you are thinking about loaning money to someone, it is important to consult with an experienced and qualified estate planning lawyer to make sure that you structure your loans in such a way that they don’t generate extra taxation of your income.

Schedule Your Free Consultation with Our Michigan Experienced Estate Planning Attorney

Einheuser Legal, P.C. is an estate planning law firm in Bingham Farms, Michigan. We help families set up wills and living trusts. Attorney Michael Einheuser is an experienced estate planning lawyer serving residents in Bingham Farms, Troy, Farmington Hills, Rochester Hills, Southfield, West Bloomfield Township and Bloomfield Township.

Schedule your free consultation today by calling 248-398-4665.

An Explanation of How Probate Works In Michigan

Probate refers to how estates get settled officially under court supervision. The court appoints a person. Usually, an adult child or a surviving spouse in the absence of a will or the deceased person’s will nominates a person. Once this person known as the Personal Representative or executor has been appointed, he or she is given the legal mandate to gather and value assets the estate owns, to pay taxes and bills, and distribute assets to beneficiaries or heirs.

Probate is designed to combat fraud after a person’s death. It freezes the estate until a court of law determines that the will is valid, all property in the estate has been located and appraised, a notification was sent out to concerned parties, there is a settlement of liabilities and payment of taxes. The court issues an order after all that has been done to distribute the property, and the estate is closed.

How Probate Works In Michigan

The Uniform Probate Code (UPC) is a set of laws that spell out the general procedure involved in settling an estate through probate in Michigan. Michigan is among the 15 states that have adopted The UPC albeit with minor variations.

Under the UPC in Michigan, there are three kinds of probate proceedings: supervised formal, unsupervised, and informal.

  • Supervised Formal Probate

Supervised formal probate refers to one whereby the court comes in to supervise the entirety of the probate process. Under supervised formal probate, the court has to approve the distribution of any property in such proceedings.

  • Unsupervised Formal Probate

All formal probates are court proceedings even for the unsupervised ones. The judge must first approve some actions the Personal Representative takes including paying a lawyer, asset distribution, or selling estate property.

A judge is involved in settling disputes arising among the beneficiaries over the meaning of a will, asset distribution, or the amounts due to particular creditors. The informal probate process cannot work in case of disputes, and that is when the court comes in.

  • Informal Probate

In Michigan, the majority of probate proceedings are informal. Informal probate is a common procedure when there are no creditor issues to resolve, beneficiaries and heirs are getting along, and no problems at all are expected.

The informal probate process starts once you file an application with the probate court to act as the estate’s “Personal Representative” or executor. After the approval of the application, you are now legally mandated to act on behalf of the estate. You will then receive from the court what is referred to as “Letters testamentary.”

Once you receive the letters, you are required to do the following:

  • Ensuring the safety of all the property
  • Distributing the property once the estate closes
  • Preparing an inventory and appraisal of the assets of the estate
  • Publishing a notice in a local newspaper alerting other creditors
  • Providing proof that you have issued the notice and mailed notices
  • Sending out formal notices to beneficiaries, heirs, and creditors you are aware of

Once there is a distribution of property, an informal proceeding is closed by filing a “final accounting” with probate court along with a “closing statement” stating that you have distributed the property, paid all taxes and debts, and filed the accounting.

Final Thoughts

If you have been wondering about how probate works in Michigan, now you have your answer. The most important thing is to ensure that you find an estate planning or probate lawyer to help you follow the right steps and ensure the best outcome possible.

Schedule Your Free Consultation with Our Michigan Experienced Estate Planning Attorney

Einheuser Legal, P.C. is an estate planning law firm in Bingham Farms, Michigan. We help families set up wills and living trusts. Attorney Michael Einheuser is an experienced estate planning lawyer serving residents in Bingham Farms, Troy, Farmington Hills, Rochester Hills, Southfield, West Bloomfield Township and Bloomfield Township.

Schedule your free consultation today by calling 248-398-4665.

How Having an Estate Plan Helps Avoid Conflict Among Heirs

Families are often unprepared for the inevitable loss and aging of parents. This leads to unprecedented rivalries that risk or destroy the wealth and family unity that parents and the estate planning lawyer worked so hard to protect. Properly crafted estate plan documents reflect a person’s instructions for ensuring that the proper beneficiaries receive their legacies and care provision for that person and their family.

Unfortunately, not even the best estate plan can substitute preparing heirs in readiness for dealing with: the complexities involved in the administration of a trust and estate, changing care needs of aging parents as well as other family members, and how to resolve or prevent conflict among siblings and avoid elder financial abuse.

The Inevitability of Conflict

Disagreements will always be there among family members, and it is how families manage and prepare for the conflict that will make a difference. In the absence of a process for conflict resolution and communication, the only thing that can happen is a permanent breakdown of family unity and costly litigation.

Parents rarely ever never want to think about conflicts among their children. However, successful families need to participate in foundational processes to prepare heirs for the inevitable loss and aging of their parents. The families participate in planning and education, discussing potential conflicts, and institutionalizing conflict resolution in the presence of a neutral mediator.

The processes help such families reduce family discord or avoid it altogether. Doing this helps to preserve family wealth and unity. Estate planners have a unique chance to weave estate planning mediation into the estate planning process while educating clients along with their families about the benefits they stand to enjoy.

Preparing Heirs by Using Confidential Estate Planning Mediation

Confidential estate planning mediation takes place in the presence of the client, their family, the estate planning attorney, and the mediator. The topics of discussion are limited to those that won’t put lawyer-client privilege at risk. The result of the confidential estate planning mediation is a memorandum of understanding for the client’s family and the estate planning lawyer.

Confidential estate planning mediation meetings provide family members with a platform to express their ideas, concerns, learning, and discussion. This approach helps heirs work out solutions so that they align with the wishes of the parents. Family members involved in such an undertaking are less likely to dispute what they had a hand in crafting.

The memorandum of understanding that comes as a result of the mediation reflects the issues and ideas discussed, proposed solutions, agreements reached, as well as a statement of whether or not the memorandum can be released and to whom. Confidentiality of the memorandum can be waived to allow the sharing of the memorandum with an investment advisor, estate planning lawyer, and other relevant advisors.

Participants can decide to turn to mediation for resolution of future conflicts to matters that might have changed since the first mediation. Family members that may later raise issues with the estate plan will refer to the memorandum that they helped create.

Final Thoughts

Estate planners and their clients have much to benefit from estate planning mediation. Heirs who are sufficiently prepared are less likely to initiate or sustain conflict. Estate planners that encourage mediation reduce the chances for unresolved disputes and misunderstandings, and increase the likelihood of protecting family wealth and unity.

Schedule Your Free Consultation with Our Michigan Experienced Estate Planning Attorney

Einheuser Legal, P.C. is an estate planning law firm in Bingham Farms, Michigan. We help families set up wills and living trusts. Attorney Michael Einheuser is an experienced estate planning lawyer serving residents in Bingham Farms, Troy, Farmington Hills, Rochester Hills, Southfield, West Bloomfield Township and Bloomfield Township.

Schedule your free consultation today by calling 248-398-4665.

Estate Planning Tips Everyone in Michigan Should Read

Whether you are advanced in age, or you are still reveling in your youth, it is a good idea to start planning for the future. Unfortunately, many people pass away without doing this, and it leaves their families in a lurch. Here are a few tips that will ensure you are prepared well ahead of time.

You should make plans even if you feel you do not have much to offer those who will remain after you pass away. The last thing you want is to have your loved ones fighting over things like clothing and antiques when they are also in the throes of grieving over your demise. Make sure that even the little things are mentioned, so there will not be any disputes later.

Put everything in writing. Going to a friend and letting them know your wishes is not enough. It is best to have everything written down and notarized so there is no way that anyone can go against your wishes. It is very hard to overturn a person’s last will when it is clear they were in the right state of mind when everything was signed, which means it is likely things will turn out just as you intended.

Think carefully before you start making plans. Many people allow emotions to get the best of them and they cut others off due to minor disputes. Every time you make significant changes, keep in mind that there may be a time when you are no longer there to rescind this. If you have mixed feelings concerning this, you should probably leave it as is.

Many families in Michigan head into probate court to battle over estates every day. If you want to avoid this fate, then make sure that you seek the advice of a Michigan estate planning attorney and follow all of the advice offered here.

Schedule Your Free Consultation with Our Michigan Experienced Estate Planning Attorney

Einheuser Legal, P.C. is an estate planning law firm in Bingham Farms, Michigan. We help families set up wills and living trusts. Attorney Michael Einheuser is an experienced estate planning lawyer serving residents in Bingham Farms, Troy, Farmington Hills, Rochester Hills, Southfield, West Bloomfield Township and Bloomfield Township. Schedule your free consultation today by calling 248-398-4665.

How To Select An Elder Law Attorney In Michigan

As you get older, there are financial, legal, and personal challenges that come your way that might become a serious problem in the long run. For the past few years, numerous laws and regulations have impacted these problems significantly. The elder law covers all the legal issues that you might deal with when approaching your elderly years. Most people address these issues through nursing home placement, estate planning, and long-term care planning. This law is rapidly growing in Michigan, and it encompasses different fields. Only experts in this field can help you fix all your problems, which is why you need the services of a Michigan elder law attorney.

If you are not familiar with what a good elder attorney is, check his or her activities in the elder law sections on their state bar to ensure their credibility. You can see if they are active on organizations or committees and if they have been officers in that particular group. He or she must also be a member of the National Academy of Elder Law Attorneys. If ever your selected lawyer has no involvement in any groups, see another expert.

The most important thing to be considered before hiring an elder law attorney is that you must be comfortable working with that person. No matter what his or her credentials are, when you are not comfortable, choose another lawyer. Some law firms have a review section on their website in which their past clients indicate the experience they had in dealing with them.

Also, you might have a relative or friend who had to seek help from an elder law attorney. Ask them for the contact number and set an appointment with that expert. If you are still not satisfied with that person, do extensive research, and you will surely find a lawyer that you can trust with your family matters.

Schedule Your Free Consultation with Our Michigan Experienced Estate Planning Attorney

Einheuser Legal, P.C. is an estate planning law firm in Bingham Farms, Michigan. We help families set up wills and living trusts. Attorney Michael Einheuser is an experienced estate planning lawyer serving residents in Bingham Farms, Troy, Farmington Hills, Rochester Hills, Southfield, West Bloomfield Township and Bloomfield Township. Schedule your free consultation today by calling 248-398-4665.

Guidelines For Your Estate Planning In Bingham Farms, Michigan

Irrespective of whether you have a sizeable estate or not, it is important to have an effective estate plan if you wish to ensure that the right persons will inherit your assets. Your plan will additionally help to restrict the amount of tax your successor will owe. Perhaps you may find the following ideas helpful if you are living in Bingham Farms, Michigan, even when you currently have an estate plan set up.

Mention Who Receives What

For those who neglect to prepare a will for themselves, the laws and regulations that govern your residence decide who inherits your properties. This consists of nonmonetary assets that you might give some thought to the disposition significant, like antiques and classic cars you highly value or maybe the piece of precious jewelry your beloved niece constantly admires.

Decide On Exactly How Your Assets Should Be Distributed

If ever you plan to include a few of your assets designated to cover particular expenses, you might need to set up a trust that incorporates such specifications. One example is wanting to earmark certain amounts for college fees and special needs for selected individuals. The trustee of your plan will be lawfully bound to make certain that the amounts designated are utilized to cover these costs.

Reduce Estate and Income Tax Liabilities

You might anticipate that your named beneficiaries will be obligated to pay certain amounts of the estate and income tax on their inheritance, reducing these taxes by employing some strategies is feasible. In particular, you could donate taxable properties to your chosen charities and give your tax-free assets, after tax savings, or life insurance policies to your inheritors.

Also, you may lessen the amount of your taxable estate by gifting an amount $14,000 or less for each beneficiary per year while you are alive, and the gift will be nontaxable.

Planning on the details of your estate and finalizing all pertaining documents will depend on you and your chosen Bingham Farms estate planning attorney. One thing is certain though, being able to prepare for all eventualities will give your loved one’s confidence that you are taking control of their future instead of leaving several factors to chance.

Schedule Your Free Consultation with Our Michigan Experienced Estate Planning Attorney

Einheuser Legal, P.C. is an estate planning law firm in Bingham Farms, Michigan. We help families set up wills and living trusts. Attorney Michael Einheuser is an experienced estate planning lawyer serving residents in Bingham Farms, Troy, Farmington Hills, Rochester Hills, Southfield, West Bloomfield Township and Bloomfield Township. Schedule your free consultation today by calling 248-398-4665.

3 Elder Law Tips Everyone in Bingham Farms, Michigan Should Read

Many people are not aware of the laws that are in place to protect those who are advanced in age. If you would like to gain some insight, it would be a good idea to continue reading.

     1. Get A Power Of Attorney

If you are in charge of taking care of someone who is elderly, you need to discuss having them sign a power of attorney. This will give you the authority to make decisions on their behalf. Even if the person is still functional at this time, they can sign the paper and stipulate that it only goes into effect if they are no longer able to function well.

      2. A Will Is Crucial

Telling someone your last wishes may seem like enough, but the reality is that it is not. There is nothing worse than having someone pass away believing that everything will be okay and their loved ones are left fighting over property and other belongings. Even if you think that your family will be fine once you are gone, and everything will be civil, you should have a will drawn up anyway.

      3. Have A Medical Proxy Assigned

Some people think that this is the same as power of attorney, but it isn’t. There are many people whose medical proxy and power of attorney are two different people. This is a separate document that allows people to make medical decisions if you cannot do this on your own. Make sure the person you select is very knowledgeable about the choices you would make if you were able to do so.

If you or a loved one are elderly, it is important to begin getting your legal paperwork with the help of a Bingham Farms elder law attorney in order. Keep all of this information in mind as you move forward.

Schedule Your Free Consultation with Our Michigan Experienced Estate Planning Attorney

Einheuser Legal, P.C. is an estate planning law firm in Bingham Farms, Michigan. We help families set up wills and living trusts. Attorney Michael Einheuser is an experienced estate planning lawyer serving residents in Bingham Farms, Troy, Farmington Hills, Rochester Hills, Southfield, West Bloomfield Township and Bloomfield Township. Schedule your free consultation today by calling 248-398-4665.

What to Discuss with Your Estate Planning Attorney Before Hiring Him or Her

No matter your age, creating an estate plan is an essential aspect of financial and family responsibility. For many folks, this is one of the most complex legal matters you will ever handle. It is vital that you find the right attorney to assist with your estate plan.

You will find that many lawyers advertise estate planning services as just one part of the practice. While this “one-stop-shopping” might seem like a good idea, you want to have someone handling your estate who focuses on estate planning. The fact is that setting up your estate involves multiple aspects of the law, including elder law and probate considerations.

Ask any prospective attorney how much of their practice includes elder law and estate planning. You want to hire someone who devotes at least half of their time to estate planning. Any less, and it is likely that they will lack the full scope of knowledge needed to plan your estate in the most equitable manner.

Although most attorneys can legally draft such documents, there are nuances to the law that can make a big difference in the price you or your loved ones pay regarding your estate. While you are discussing their experience with estate planning, inquire about other aspects of law relevant to your situation. These often include government benefits, elder law, business, real estate, taxation, and probate.

Another thing you want to know is if the attorney has experience with probating estates or if their focus is on helping clients to avoid probate. Fully-funded trust-based estate plans can save your loved ones a considerable amount of time and money.

In addition to finding out the general practice of the attorney, you should inquire whether they help you properly title your assets, such as your real properties and financial accounts. You need a lawyer capable of helping you to fund your trust, and a willingness to work with you to do so.

Before selecting an estate planning attorney, you should also ask about their continuing education. As with many other professions, it is important to have a professional who engages in learning, even if your state does not require it. Laws change, and the way to handle legal documents along with it. You deserve an attorney who is abreast of the latest in estate planning and elder law.

If you are satisfied with the answers you have received up to this point; you can then ask what type of preparation you need to do for your appointment. A reputable and reliable estate planning attorney will want comprehensive information regarding your properties, beneficiaries and more. Being properly prepared will expedite the process.

You deserve the peace of mind that comes with proper estate planning. Asking these questions will help you to find the right law firm to assist with the drafting and execution of all of your estate related documents, from preparing the documents to ensuring the right beneficiaries receive your estate.

Schedule Your Free Consultation with Our Michigan Experienced Estate Planning Attorney

Einheuser Legal, P.C. is an estate planning law firm in Bingham Farms, Michigan. We help families set up wills and living trusts. Attorney Michael Einheuser is an experienced estate planning lawyer serving residents in Bingham Farms, Troy, Farmington Hills, Rochester Hills, Southfield, West Bloomfield Township and Bloomfield Township. Schedule your free consultation today by calling 248-398-4665.

An Introduction to Michigan’s New Asset Protection Trust

Trusts have always been excellent estate planning tools. Your beneficiaries can enjoy all kinds of protections once you are gone, including protection from remarriages, divorce, or creditors. Even though beneficiaries could enjoy access to the trust’s assets for their needs, their creditors or their divorcing or new spouses couldn’t in many cases.

However, these protections weren’t available to you during your lifetime. While you’re still well and alive, you enjoyed complete access to the assets in your trust and by extension so do any creditors.

The situation has however changed since December 5, 2016 with the introduction of Michigan’s new asset protection trust act known as the Qualified Dispositions in Trusts Act. The Act took effect on February 5, 2017. With the introduction of the act, Michigan has joined 16 other states that already allow Domestic Asset Protection Trusts (DAPTs).

Domestic asset protection trusts are irrevocable trusts that can shield assets from the claims of an individual’s creditors, provided that the individual meets the particular legal requirements. Individuals who are worried about potential creditor exposure, notably physicians, executives, and business owners, need to consider using Domestic Asset Protection Trusts (DAPTs).

Before the introduction of Michigan’s new asset protection trust act, people who wanted to use a DAPT had to first transfer their assets to out-of-state trustees in jurisdictions such as Nevada, Alaska, or Delaware. However, the introduction of the new law means that assets can be transferred to a person that resides in Michigan, such as a Michigan professional, corporate trustee, or a family member.

The transferor can never be the trustee since he or she can only be a beneficiary of the trust. However, the transferor may still retain rights to:

– Veto distributions from the trust

– Replace or remove trustees

– Receive income from the trust

– Receive discretionary distributions of the income or principal

– Direct investment decisions of the trust

– Receive unitrust payments or annuity from charitable remainder trusts

– Receive annuity from the trust not exceeding 5 percent of the initial value of the trust

– Receive unitrust payments or annuity from a grantor retained annuity trust

– Direct the distribution of assets upon the death of the transferor provided that there is no transfer of assets to the creditors of the transferor’s estate, the transferor’s estate, the transferor’s creditors, or the transferor.

If adequately funded and established, the Act protects the assets the transferor has relocated to the trust from the transferor’s creditors upon expiration of a 2-year period starting the date the assets were relocated except particular situations involving fraudulent concealment. A longer statute of limitation may apply in the case of bankruptcy.

Final Thoughts

The introduction of the Qualified Dispositions in Trusts Act is good news for Michigan residents since it offers numerous asset protection benefits. If you have any questions regarding the Act or any other information regarding estate planning, you need to find a qualified and experienced estate planning attorney to help you.

Schedule Your Free Consultation with Our Michigan Experienced Estate Planning Attorney

Einheuser Legal, P.C. is an estate planning law firm in Bingham Farms, Michigan. We help families set up wills and living trusts. Attorney Michael Einheuser is an experienced estate planning lawyer serving residents in Bingham Farms, Troy, Farmington Hills, Rochester Hills, Southfield, West Bloomfield Township and Bloomfield Township. Schedule your free consultation today by calling 248-398-4665.