Your “estate” is the net assets you leave here on earth after you die. But, your “estate plan” goes a bit farther. It not only includes what happens after you die – but it also addresses other aspects of your life before you die. Why? So, you and your love ones are taken care of if you are unable to function normally. There are 5 core components of your estate plan.
- The rest of your Life
- Your Family’s future
- Your “Causes”
- Avoiding or minimizing Probate
- Minimizing Estate Taxes
- Financial: what happens if you are incapacitated and unable to make financial decisions – who will make those for you? This is addressed in your Power of Attorney for Finances.
- Health: what happens if you are incapacitated and unable to make healthcare decisions? Do you have healthcare desires that you can list now? Who will be your advocate to make sure that your desires are carried out? Who will make decisions for you in other areas? This is addressed in your Healthcare Advocates & Directives.
- Guardianship: if you die, who do you want to care for your minor children? This is addressed in your Will.
- Financial Support: when you die, how do you want your assets to be distributed to Your spouse? Children? Grandchildren? Charity? Etc.? How much? When? This is usually addressed in your Living Trust and Irrevocable Life Insurance Trust.
- Financial Integrity: who is going to faithfully carry out your wishes for your family’s financial future? This is usually addressed in your Living Trust and Irrevocable Life Insurance Trust.
- Charity: do you have charities that you like to contribute to after your death? How would you like this to happen – One time? Over time? This is usually addressed in your Living Trust.
- Time: the minimum period to probate an estate in Michigan is 5 months – and some take up to 18 months. That’s a long time to wait. The easy way to avoid probate is through a Living Trust.
- Costs: the probate fees charged by the state are not bad in Michigan, but the attorneys’ fees to guide your personal representative through the process normally exceed the cost of creating a Living Trust.
- Estate Tax: Most people don’t need to be concerned about estate taxes – as there is none until your estate reaches $5.45 million or $10.9 million for a couple (called the “AC” amount).
- Gifting: Gifts are tax free if they do not exceed $14,000/spouse/person/year. So, you and your wife could give $28,000/child/year tax free. Gifts in excess of this amount are applied against the AC amount. Gifts to non-profits are never taxed.
So, the basic Estate Plan includes the following items:
- Healthcare Advocates & Directives
- Power of Attorney for Finances
- Living Trust
- Irrevocable Life Insurance Trust (ILIT) – if you have significant life insurance.
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