ALTERNATIVES TO PROBATE
From the time we are teenagers, our parents tell us about the evils of probate court. What exactly is probate and why should we avoid it?
When a person dies with assets such as real estate, bank accounts, stock or bonds in their name alone, these assets must go through the probate court system before delivery to the new owner. If there is no will, Michigan law determines who are the next of kin or closest relatives who receive according to a formula. We will analyze your specific situation in a free conference.
If assets total under $18,000, they can be probated in a simple one-day procedure.
Assets over $18,000 must go through a full probate. This usually lasts nine months or longer. The cost is usually $3,500 to $5,000 and up including court charges and lawyer and accountant fees, plus death taxes for large estates.
It is important to note that a Will does not avoid probate but instead tells the probate court what to do with assets which were owned in your name alone.
The most common way to avoid probate is joint ownership. However, there are certain dangers in joint tenancies. The other person could take the money during your lifetime or their creditors could seize your property to pay the joint owner’s debt. There is no guarantee the joint owner will honor your request to split the assets with your other heirs. Your will does not control joint property.
Joint ownership can cause major tax problems for you and your heirs. You could lose your property tax homestead exemption. If you own land, stocks or mutual funds which have increased greatly in value since you acquired them, joint ownership could be a costly mistake. Upon your death the joint owner will receive the asset without probate. However, the IRS may take the position that your joint owner takes your original "cost basis" for the asset. When your child later sells the asset, a large capital gains tax could be owed.
Consider a “living trust” to avoid all of these probate problems. Trusts are not just for the rich. A trust can save your family thousands of dollars and months of delay.
Your family can also end up in a probate court conservatorship or guardianship if a parent becomes unable to manage finances or make medical decisions. This can be avoided by giving financial and medical powers of attorney to a trusted child or friend.
When you die, any money or other assets over $5,000.00 passing to your minor child will be locked up in a probate court conservatorship. The minor will receive the funds at age 18 with no instruction and protection from overspending. We have special tools to prevent the minor from having access to the funds until he or she is more mature.
Many assets such as insurance, IRA’s, 401(k)’s, annuities and even bank accounts and stocks can have a beneficiary added to avoid probate. Let us help you choose the right way to name a beneficiary and the alternates.
PLEASE CALL 248-886-8622 FOR YOUR FREE ANALYSIS
OF THE RIGHT WAY FOR YOU TO AVOID PROBATE