News You Can Use
Welcome to the new Estate Planning Focus newsletter from Warner Norcross & Judd. New? Well, not exactly. It has a different look, but the intent of the newsletter remains the same: To bring you information about trusts and estate planning that you can use to manage your wealth.
For example, in this edition we talk about paying a little in taxes now to save a lot later. In fact, in the example we show how a person with a $7 million estate is able to save nearly $400,000 in estate taxes. That’s the type of practical information we hope to supply you with in coming editions.
Our attorneys also keep close tabs on what's happening legislatively in Lansing and Washington. Inside this edition you will find the latest on the Michigan Business Tax and how it affects trusts, Family Limited Partnerships and Family Limited Liability Companies.
Another story examines GRATs and IDITs. If you don't know what those are, now is the time to find out — especially in today’s stagnant economic conditions.
We are adding a new feature to our lineup. It's called "I Was Wondering . . . " and is designed to be an interactive column with Warner's T&E attorneys answering questions from readers.
We hope you find this newsletter interesting and informative. And again, thank you for choosing Warner Norcross & Judd.
I Was Wondering
Q: I already have a will. Is that good enough, or do I need a living trust, too?
A: The primary advantage to making a living trust is that property in or payable to the trust doesn’t have to detour through the probate court before it reaches the people you want to inherit it. In a nutshell, probate is the court-supervised process of paying your debts and distributing your property to the people who inherit it.
A will, while a very important estate planning tool itself, does not avoid probate. In fact, only assets that are subject to probate, generally those in an individual’s name alone at death, are subject to the terms of a will. The average probate can take months before the inheritors get anything. And by that time, there is usually less for them to get because attorney fees and court costs can diminish the estate. If you don’t have a will, any property that isn’t transferred by your living trust or other probate-avoidance device (such as joint tenancy) will go to your closest relatives in an order determined by state law. These laws may not distribute property in the way you would have chosen. Having both a will and a living trust eases the transition for heirs.
Q: My dad recently died and left an estate worth $4 million. Most of this he left to his wife, and some to his three daughters. Does the wife’s share apply first to the $2 million estate tax exclusion, leaving the daughters to pay the inheritance tax?
A: Everything inherited by your dad's widow (if she is a U.S. citizen) is exempt from federal estate tax. If the daughters didn’t inherit more than the estate tax exclusion ($2 million for deaths in 2006 through 2008), the estate won't owe any estate tax. If tax is owed, check your dad's will to see whether he specified what property should be used to pay it.
Your dad's executor must still file an estate tax return within nine months of death, however, because the total value of the estate exceeds $2 million. These returns are complicated, to say the least; the executor of your dad's estate should hire an experienced lawyer to handle it.
'I Was Wondering' gives readers an opportunity to ask questions of our T&E attorneys. Not all questions will be answered publicly. To submit a question, please send it by e-mail to Lori Tuttle at firstname.lastname@example.org