MYTH 1: If I don't have a Will or Trust, the State of Michigan will take all of my assets.
FACT: Possible, but not likely. Without a will, your property will be distributed pursuant to a default priority list contained in Michigan's Probate Code, and the State of Michigan is at the bottom of the list. So, if you die without a Will or Trust, the State of Michigan will not take your assets unless you have no surviving family, or they cannot be located. However, this priority list may not match your individual wishes for distribution of your property after death, and at that point it is of course too late to do anything about it. Thus, the lack of a Will can easily lead to “accidental disinheritance” of loved ones. Also, a Will or Trust allows you to nominate individuals to serve as guardian and/or conservator for your minor children should you die before their adulthood. If you die without a Will or Trust, your estate generally must go through Probate.
MYTH 2: Having a validly executed Will avoids probate.
FACT: Not true. On the contrary, for the provisions of a Will to be validly administered at all, the Will must be admitted to Probate, where a personal representative is appointed by the court to administer its provisions. Without the appointment of the court, no one has the legal right to dispose of your estate, unless you have executed a Trust.
MYTH 3: Probate is a lot more expensive and lengthy than administering a decedent's Living Trust.
FACT: Not necessarily. The probate process can be quite simple and involve nothing more than the filing of paperwork by mail. Unless the heirs or beneficiaries are fighting, a probate administration is usually done in about 6-9 months. As to costs, Wills are much less expensive to draft, but Probate imposes a filing fee and Inventory Fee that will add up to hundreds of dollars, even in the most modest estate. So, the higher cost of a Trust is largely (if not entirely) offset by the fees imposed in Probate, and Trusts offer the added benefits of privacy and convenience, and are much harder to challenge after your death.
MYTH 4: Trusts are only for the rich.
FACT: Not so. Many factors other than wealth affect the desire for a Trust plan, such as: (1) caring for a minor or disabled child; (2) transferring ownership of property in accordance with your wishes; (3) caring for your surviving spouse or parent; (4) nominating a guardian or conservator for a minor child; (5) transferring a closely-held family business; (6) transferring ownership of property in another state; (7) charitable giving; (8) avoiding probate; (9) avoiding taxes; and (10) care of pets. While a Will provides for some of these issues, it either cannot provide for others, or is not as well suited for them as a Trust. In short, estate planning is the way by which a person controls the legacy of their life, and Trusts simply provide a greater degree of control than a Will.
MYTH 5: Putting property in a revocable Living Trust restricts what I can do with the property during my lifetime.
FACT: Not true. A Revocable Living Trust is created while you are alive and can be revoked or amended by you at any time. Any asset placed in the name of the trust is subject to the control of the grantor/trustee (you). Therefore, during your lifetime you can essentially do what you want with the assets. Also, a Trust may contain provisions to provide for your affairs – and your own care – in the event that you become incapacitated due to illness or injury. This is obviously an enormous advantage over a Will, which only has legal meaning upon your death.
MYTH 6: Putting property in a revocable Living Trust prevents creditors from accessing those funds or assets.
FACT: Not true. A revocable Living Trust does not provide any general creditor protection. Since a grantor of a revocable Living Trust has complete and full access to the funds or assets of a revocable Living Trust, a creditor can normally reach the property in such a trust. There are some irrevocable Living Trusts that provide some creditor protection.
MYTH 7: My Trust is “funded,” because it clearly states that I want certain assets held in Trust, and it has an Exhibit page that describes them.
FACT: No! Assets must be individually conveyed, or “titled,” into the Trust. For example, a home must be transferred into Trust by a Deed; beneficiary designations of insurance policies or annuities must be changed to name the Trust as beneficiary; accounts which you wish to be held by the Trust, solely or jointly, must be titled with the bank accordingly.
MYTH 8: Once an estate plan is developed, I can just forget about it.
FACT: Not exactly. While it is true that there is no requirement that an estate plan be reviewed or amended, it is strongly recommended that you periodically review it to see if updates are advisable. Changes in your family situation, such as births, deaths, marriages, divorces, or children reaching age 18 may make it advisable (or necessary) to name new beneficiaries, fiduciaries, and/or agents. Revisions may also become advisable if (1) you purchase, sell or inherit assets, (2) you retire, (3) you move to a different state, or (4) there are changes in the estate and gift tax laws. In addition, your wishes may simply change over time as your family changes or children mature. Ideally, you should review and update your plan annually, but in any event not less than every three to five years. Lastly, if you have a Trust it is vital that you fund it by actually transferring assets into it.
MYTH 9: Establishing guardianship or conservatorship for an incapacitated adult is a lengthy, expensive process.
FACT: Not necessarily. Much like the Probate of a Will, as long as there are no disputes within the family regarding the issue, the process of appointing a guardian or conservator can be quite simple, and can be accomplished largely by the filing of paperwork by mail. However, there must be at least one court hearing to appoint a guardian or conservator, even if there are no objections from anyone. The length of time required to obtain the appointment is often determined primarily by the court’s scheduling of a hearing, but this can usually be done within a couple of months. The cost is going to be most affected by whether there will need to be more than one hearing to obtain the appointment, as well as by the difficulty of obtaining documentation and other evidence of need for the appointment.
MYTH 10: If someone is “joint” on my bank account, I don’t need to execute a Power of Attorney, and I won’t need conservatorship if I become incapacitated.
FACT: Incorrect. Unless your bank account is the only asset you own, joint ownership of your account probably will not be adequate to provide for the handling of your affairs if you become incapacitated. This is because the joint ownership of the account only gives that person access to that account. Without a Power of Attorney (or conservatorship) no one has the legal right to, for example: sell your car, convey your real estate, or buy or sell stocks for you, etc. In the event of incapacity, the usefulness and best use of these and other assets may change radically (i.e., you obviously do not need a car if you’re in a coma, but you may need funds that could be obtained from the sale of the car).
BONUS MYTH: I made one of my children joint on all my bank accounts, but my Will provides that I wish to divide everything evenly among my kids upon my death, so when I die all of my children will receive an equal share of those accounts.
FACT: Not necessarily. Upon your death, whoever is joint on an account with you becomes the owner of the account. As such, he or she is free to withdraw all of the funds for him or herself, with no legal obligation to share the funds with anyone, regardless of what your Will says. This somewhat unsettling situation can be avoided by the use of a Power of Attorney, or through joint ownership of the account with a Trust, or perhaps a “pay on death” provision in the account.