Wills - Patrick & Associates, PLLC

What Is a Testamentary Trust?

Patrick & Associates, PLLC — Tue, 02 Mar 2021 05:23:52 GMT

When you’re gone, your most important assets will remain — and they will be reallocated. Estate planning is a process that keeps you in control of the most important things in your life. Depending on the specifics of your circumstances, there are numerous estate planning mechanisms and tools to discuss with your estate planning attorney, including the testamentary trust.

A testamentary trust is a useful estate planning tool which can allow you to maintain control over some of your most important assets and help protect your beneficiaries in the months and years to come — particularly minor children, loved ones who happen to have a disability, and family members who may require some level of financial oversight and guidance to manage their inheritance.

What Is a Testamentary Trust?

In most basic terms, a testamentary trust is a trust that is contained in a will. Generally speaking, a testamentary trust is created through instructions set down in a decedent’s last will and testament.

Specifically, the testator (will-maker) may use their will to set down instructions for establishing a trust, specifying the assets that should be transferred into the trust, naming a trustee and beneficiaries of the trust, and leaving instructions for how the trustee should manage the trust contents on behalf of the beneficiaries. One example of an asset often used to fund a testamentary trust is the proceeds of a life insurance policy owned by the testator.

You can create multiple testamentary trusts in your will — for instance, you could create one trust for the benefit of your spouse, and another for your children or grandchildren.

Because it is established upon the death of the settlor, a testamentary trust is an irrevocable trust. With that said, you can make modifications or adjustments to the terms of the trust for as long as you are alive by amending or replacing your will with the help of a knowledgeable and thoughtful estates and trusts attorney. A testamentary trust can be used in conjunction with other estate planning mechanisms, including a revocable living trust. You can also still choose to make distributions of property or other assets through your will, and only transfer some assets into your testamentary trust.

How Do Testamentary Trusts Work?

Like all trusts, a testamentary trust is a written agreement created by a settlor or grantor that names an individual who is responsible for managing property as directed by the trust agreement, known as the trustee. Anyone who receives assets out of the trust is known as a beneficiary.

As we noted earlier, a testamentary trust is established through your written will. After the testator passes away, their will must be submitted for probate. It is then the responsibility of the decedent’s personal representative to see that the testamentary trust is opened and funded with the appropriate assets, following the instructions set down in the will. The trustee is then responsible for managing and distributing trust assets until the trust expires or the contents are fully distributed to the trust beneficiaries.

Often, a trust may be set up to expire on completion of a certain event — such as a beneficiary reaching a predetermined age or completing a milestone like graduating from college.

It is worth reiterating that the assets you want placed into your testamentary trust will not avoid probate. All wills are subject to probate in the Michigan courts. Funds and assets can only be transferred into the newly created trust after they have been probated. The trustee may also need to provide regular reports and accountings to the probate court, to prove that the trust is being properly managed.

The probate process can become expensive and time-intensive, particularly without proper planning. If probate avoidance is one of your main estate planning goals, you may wish to discuss the benefits of creating a revocable living trust with your estate planning attorney. Unlike a testamentary trust, a revocable living trust is funded with assets while the settlor is still alive, which means that these assets can be transferred outside of probate. Revocable living trusts also tend to offer greater privacy, since they do not become a matter of public record.

As you consider the upsides and limits of any trust, it is important to consider who you will name as trustee. It is important to find someone who will be up to the important task of managing your trust assets and distributing them appropriately. The most important thing about choosing a trustee is that they are the best choice for your circumstances. This process is not about making people feel equal; it is about ensuring your wishes are respected and carried out when you no longer have a say in the matter.

Why Use a Testamentary Trust?

Testamentary trusts are often used to help ensure that you are able to maximize the assets available to your beneficiaries, while ensuring that receiving an inheritance does not become a detriment.

Testamentary trusts are often used to hold funds for the ongoing or future education of minor children, or to allocate funds in set increments so that they cannot be squandered by a profligate beneficiary who is irresponsible with money. Testamentary trusts can also be supplemental or special needs trusts, which are designed to provide an inheritance to beneficiaries who happen to be physically, mentally, or developmentally disabled without interrupting government benefits.

For an example, consider the fictional couple Steve and Sandra, who have two 18 year old boys, Ricky and Spencer. When Steve and Sandra die suddenly in a car accident, the balance of their estate is transferred to the boys.

Always the less responsible son, Spencer immediately spends his inheritance on a sports car and a new home, rather than using the money for school as his parents might have wanted. While Ricky tries to be responsible and spend his inheritance on college expenses, unexpected car repairs and a turbulent stock market affect him financially, forcing him to take on a full-time job in addition to school.

In both cases, Spencer and Ricky might have benefitted had Steve and Sandra set up testamentary trusts, nominating a responsible trustee to manage the finances for their children and helping to ensure that their health, education, maintenance, and support would be taken care of.

The Importance of Working With an Experienced Michigan Estate Planning and Probate Attorney

Whether you are taking care to plan for your family’s future or put in the position of defending or contesting a will or trust in the Michigan probate courts, know that you do not have to go through these difficult circumstances alone.

Ready to create a plan that will help you maintain control over your most important assets, and help take care of the people who matter most? Our firm has the experience and knowledge to walk you through the process of creating an estate plan that will protect your family.

At the Patrick & Associates, PLLC., we put our legal experience and skills together with our commitment to excellence in representing your rights. You can depend on our law firm’s ability to listen to you and our talent for creative strategies. We will be flexible in order to accommodate your needs, and we work hard to discuss these difficult matters in terms that are easy to comprehend. With staff available 24 hours a day, we’re also never far from your questions and concerns.

If you have further questions or are looking for representation as you navigate Michigan’s tricky probate court system, don’t hesitate to call our Southfield, Michigan office at (248) 663-2566 to set up your initial consultation. You may also click here to get in touch online.

This post has been prepared for general information purposes only. The information you obtain here is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls and electronic mail. Accessing the content of this site does not create an attorney-client relationship. Nor, does contacting us create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.

What Is a Pour-Over Will?

Patrick & Associates, PLLC — Mon, 08 Feb 2021 06:14:32 GMT

Over the course of a lifetime, we acquire assets. When we pass on, those assets remain and they will be reallocated. The question is — will you have a say in the matter? Estate planning is a process that gives you a say, and there are many important tools and mechanisms to consider with your attorney as you move forward, including the pour-over will.

What Is a Pour-Over Will?

Black’s Law Dictionary defines a “pour over will” as:

A will giving money or property to a trust.

In other words, a pour-over will is a will written to “pour” all of the estate assets that pass through it directly into a previously created trust at your death. It is a way to make sure that all of your assets, no matter how large or small, are able to be transferred into a trust when you are no longer around to fund the trust yourself.

A pour-over will must satisfy all of the other legal requirements needed to be considered valid under Michigan law. Typically, the “pour-over” mechanism is activated by a written provision which transfers property into an existing trust. A pour-over will is typically used in conjunction with a revocable living trust, also known as an inter vivos trust. You can learn more about the different types of trusts commonly used in Michigan estate planning by clicking here.

A pour-over will can offer a few unique benefits, depending on your specific circumstances. Above all, a pour-over will acts like a safety net or backboard, helping to ensure that your assets will be funneled into your trust — and, by extension, managed and distributed in line with the terms set down in the trust agreement.

Estate planning can be a complex and multifaceted process, and it is not unheard of for things to “slip through the cracks.” Perhaps you simply forgot or overlooked a valuable piece of property that you would have wanted to title into your trust; maybe you acquired a new asset but never got around to adding it into your trust during your lifetime. In such cases, a pour-over will can help provide you with peace of mind, and ensure that your assets will be handled in a manner appropriate for your circumstances. If you do not make any plan to deal with these assets, they may ultimately be subject to Michigan’s strict laws of intestate succession.

At the same time, a pour-over will is a mechanism that can empower you to maintain control. Most commonly, wills are used to distribute assets to your chosen devisees outright; with a trust, you can set up spendthrift provisions, delay distributions, and otherwise manage when and how the trust assets are to be used.

Another potential advantage is that pour-over wills can be used to help protect your privacy. Wills subject to probate are a matter of public record, and pour-over wills are no exception. However, with a pour-over will, you may be able to state that all solely owned assets should be distributed into your trust, rather than detailing specific assets or intended recipients within the will itself. Because trusts are not public record, you can keep a lot of information about your family history and finances a lot closer to the chest.

Finally, pour-over wills can offer a measure of clarity and simplicity in some circumstances. Ultimately, managing and distributing your estate assets may be easier and more straightforward when all decisions are controlled by the trust agreement, rather than multiple mechanisms; this arrangement may also help simplify things for your personal representative in the short-term.

Important Considerations About Pour-Over Wills and Your Michigan Estate Plan

One of the biggest advantages of creating a revocable living trust is that the assets you place into it during your lifetime are able to bypass probate, simplifying the estate administration process and potentially sparing your estate from taxes and fees. However, it is important to note that assets that pass through a pour-over will do not avoid probate, and must be subject to this process before they can be distributed through the trust.

Pour-over wills are subject to probate proceedings; with that said, they can be used to streamline probate as part of a thoughtful and comprehensive estate plan.

Specifically, in most cases a pour-over will works best as a safety net or last resort, to catch any assets that haven’t already been accounted for. If you take action to sufficiently fund your trust during your lifetime, and take advantage of the nontestamentary transfers available to you (such as adding beneficiary designations to your financial accounts or owning property as joint tenants). This way, you can have some peace of mind that your most valuable and important assets will be transferred smoothly and efficiently — lessening the financial and personal costs of probate for your beneficiaries.

Another important thing to note is that pour-over wills are different than testamentary trusts. A pour-over will is used to funnel assets into a trust that has already been established during your lifetime. In contrast, a testamentary trust is created through your will, and only takes effect after your death.

The Importance of Working With an Experienced Michigan Estate Planning and Probate Attorney

Whether you are taking care to plan for your family’s future or put in the position of defending or contesting a will in the Michigan probate courts, know that you do not have to go through these difficult circumstances alone.

Amending or Updating a Will in Michigan

Patrick & Associates, PLLC — Mon, 19 Oct 2020 04:18:24 GMT

A will is an important estate planning document for anyone who is looking to prepare for the future care of their family and assets. Wills are one of the most cost-effective ways to plan for the distribution of your estate. If you do not choose, the State makes those crucial decisions for you — and your most treasured assets may end up being distributed in a way that does not align with your wishes and goals.

Meanwhile, a will also offers other practical benefits. This simple tool can empower you to nominate someone you trust to handle your affairs in the probate court; nominate a guardian to handle the care, custody, and control of your minor children; and nominate a conservator to handle the financial affairs of your minor or incapacitated adult children or loved ones.

Wills facilitate the probate process and, if executed properly, can help to avoid or minimize the potential for contests and prevent family disagreements after you are gone.

Simply put, a will is a way to take care of those you love and all that you have worked hard for. As with other important estate planning mechanisms, it is important to remember that a will is not necessarily a “set it and forget it” document. We all acquire assets and undergo countless changes over the course of a lifetime. Along the way, it is important to regularly reassess your will and other estate planning tools, to assure that they reflect your circumstances and your goals.

Updating, Amending, or Replacing a Last Will

Broadly speaking, there are two primary ways to update or amend a will in Michigan:

to add a codicil or similar writing that clarifies or modifies some or all of the existing will, or
to revoke and replace the existing will by creating a new one

Let’s explore both of these processes in a bit more depth:

Supplementing or Updating a Will With a Codicil

Black’s Law Dictionary defines a codicil as:

an addition or supplement to a will, either to add to, take from, or alter the provisions of the will.

In other words, you may think of a codicil as an amendment to a will. It may revise or update some portion of the existing will, or provide additional supplemental information. Generally speaking, a formal codicil is considered to be valid if it follows the same standards used to execute the original will. That is:

Put in writing
Signed by the testator or in the testator’s name by some other individual in the testator’s conscious presence and by their direction
Signed by at least two individuals, each of whom signed within a reasonable time after he or she witnessed either the signing of the will (or the testator’s acknowledgment of that signature or acknowledgment of the will)

With that said, it is important to remember that Michigan law also acknowledges other writings intended as wills, even if they were not necessarily executed in compliance with the guidelines above. This means that a document may be considered valid if a proponent can establish, by clear and convincing evidence, that the decedent intended the writing to constitute a partial or complete revocation of their will; an addition to or alteration of their will; or a partial or complete revival of a formerly revoked will.

Under Michigan law, there may also be other ways to modify or update an existing will without formally replacing it — such as updating a separate writing referred to in the will, which identifies the distribution of certain types of tangible personal property. This writing,

may be referred to as one to be in existence at the time of the testator’s death; it may be prepared before or after the execution of the will; it may be altered by the testator after its preparation; and it may be a writing that has no significance apart from its effect on the dispositions made by the will.

To be admissible as evidence of intended disposition, the writing must be either in the testator’s handwriting or signed by the testator at the end, and must describe the items and the intended devisees with reasonable certainty.

You don’t have to deal with these confusing guidelines alone. An experienced estate planning attorney can help you understand and address all of the legal formalities associated with amending, revising, or updating a will, and help you to execute a writing or document that works for your circumstances. A knowledgeable legal professional can also help you to consider all of your options, which may include revoking an existing will and creating a new one to replace it.

Replacing a Prior Will by Creating a New One

In order to help mitigate the potential for contests or confusion, it may be advisable to write an entirely new will, and expressly revoke the existing one in the process.

Generally speaking, a will prepared with the assistance of an attorney will contain language to the effect of: “This is my will and I revoke any prior wills and codicils.” When executed properly, this means that the current document nullifies previous writings.

Previous wills may also be revoked through the execution of a subsequent will that revokes the previous will “by inconsistency.” Under Michigan law, the testator is presumed to have intended a subsequent will to replace rather than supplement a previous will if the newer will “makes a complete disposition of the testator’s estate.” If this presumption arises and “is not rebutted by clear and convincing evidence,” then the previous will is revoked, and only the most recent will is operative upon the testator’s death.

To prevent any confusion stemming from having multiple documents, the testator or another person acting on their direction may also intentionally perform “a revocatory act on the will” — including “burning, tearing, canceling, obliterating, or destroying the will or a part of the will.”

As you consider revoking and replacing your will, remember that an attorney can be an invaluable partner — helping you to execute these documents effectively and completely, while taking time to consider the specifics of your unique circumstances.

“When Do I Need to Review or Update My Will?”

Setting up a will isn’t always the most pleasant thing to think about — so it’s no surprise that many people are reluctant to go back and review their will over time. Indeed, many individuals will simply set their wills aside, perhaps for years or decades on end.

However, it’s important to remember that your life is always moving forward, and your circumstances are always changing. After a few years, you may wish to name a new guardian for your children or nominate a new personal representative. You may want to change who you list as a beneficiary, and how much of an inheritance you leave behind.

As a result, it’s helpful to make reviewing your will a regular practice. Sometimes, life events can actually make the provisions you set down in your will obsolete or outdated — say, if you are predeceased by one of your beneficiaries, or if you sell or dispose of an asset before you pass away. Similarly, changes in your personal, professional, or financial situation may cause you to rethink things, and make choices that differ from what’s set down in your documents.

Generally speaking, it is a sound practice to consult with your estate planning attorney to review potential additions or changes to your will every few years.

A number of life events may also be cause to review and revise your estate plan, including:

The death of a loved one (particularly an individual named in your will to receive estate assets)
Marriage or divorce
Acquiring new assets
Disposing of assets listed in your will
Experiencing a significant change in the value of your property
The birth or adoption of children and grandchildren
Minors reaching the age of majority
The incapacitation of a loved one
Significant changes in your personal relationships

The Importance of Working With an Experienced Estate Planning and Wills Attorney

Considering the importance of reviewing or updating your will? Looking to create an estate plan that will suit your long-term goals? Don’t hesitate to get in touch with our Attorney Dean E. Patrick to continue the conversation.

Mr. Patrick can help you set a plan for yourself and your loved ones. His knowledge of Michigan probate law ensures you will get the legal help you need when it’s time to take care of your estate planning, including wills, trusts, and powers of attorney.

Mr. Patrick has the experience to walk you through the entire process of creating or reviewing a last will that will truly protect your family, and ensure that property is handled in the manner you decide.

The only things that go away with time are snowflakes, youth, and opportunities. You have an opportunity to plan for yourself and your loved ones. Don’t let it pass.

At Patrick & Associates, PLLC, we put our legal experience and skills together with our commitment to excellence in representing your rights. You can depend on our law firm’s ability to listen to you and our talent for creative strategies as we help you prepare for the future.

Have any more questions? Ready to get started? Contact Dean E. Patrick at his Southfield office at (248) 663-2566, or click here to arrange your initial consultation.