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Mar 2004
08
March 08, 2004

Estate Planning for Nontraditional Families and Individuals

Estate planning. When you hear those two words, what do you visualize? Do you think of a family of four with two young children? Or do you picture a wealthy elderly couple with grown children? To get the most accurate picture of who really needs estate planning, look in the mirror. Estate planning is not just for people with children or lots of money; estate planning is for everyone. This includes single individuals and those who are remarried. In fact, those who are single or remarried have special circumstances of their own.

In 2002 alone, approximately 65,104 marriages took place in Michigan; of that number, approximately 22,135 or 34% were remarriages.* In addition, approximately 37,804 divorces and annulments occurred in Michigan in 2002, leaving at least 75,608 people single (not including those never married or widowed).* The following are some reasons you need estate planning even if you don't have children or significant wealth.

Intestacy. Did you know that if you do not write a Will, Michigan law will "write" one for you? For example, if you are single with one surviving child, your entire estate passes to your child. If you have no children, but have one or both parents living, your estate will pass to both parents equally or to your surviving parent. If you have no children and no surviving parents, your estate will pass to the descendants of your parents - your siblings or half-siblings - or your nieces and nephews. Finally, if you do not have a child, surviving parents, or descendants of parents, your estate will pass to your surviving grandparents or their descendants - your uncles and aunts. Does this mirror your intent? If not, you should draft a Will.

As for those who are remarried, did you know that if your spouse and your parents survive you, but you have no children, your spouse receives the first $172,000 from your estate plus 75% of your remaining estate, and your parents split the remainder? If you are survived by your spouse and your child (by blood), your spouse receives the first $172,000 of your estate plus one-half of the remainder, and your child receives the other half. Essentially, if you have less than $172,000 in your estate, your spouse will receive everything and your child will receive nothing. Is this your intent? If not, you should draft a Will. Bear in mind that this does not include items that pass through beneficiary designations, such as life insurance or IRAs, or property that you own jointly, such as a house.

Guardianships and Conservatorships. If you are single or remarried, who will raise and provide for your child? You should name a guardian and/or a conservator for your child. A guardian has a legal responsibility for caring for a minor child, but is not legally obligated to provide for the child from the guardian's own money. You can appoint a guardian for a minor by a Will or by another writing that is signed by the parent and witnessed by two people. If the child is 14 or older, he or she can object to the appointment. You should consider providing your children with adequate resources upon your death and also determine whether you want the guardian to control the money and manage it. If you have concerns, a conservator or trustee can manage your child's property instead. A conservator and trustee can also be appointed through your Will.

Beneficiary Designations and Life Insurance. If you have an impending marriage, divorce, annulment, or remarriage, you need to review your beneficiary designations. Life insurance, IRAs, and 401(k)s will pass directly to whomever is named on your beneficiary designation. Your beneficiary designations may need to be brought up to date with your current desires. For single people, beneficiary transfers are typically the easiest and least expensive way to transfer your money. These designations override your Will.

Be careful about who you designate as a beneficiary. For example, some life insurance policies state that you may not name a beneficiary who does not have an "insurable interest" in your death, i.e., someone who will suffer a financial loss upon your death. If you have a boyfriend or girlfriend, but you do not own property or a business interest with him or her, you may not be able to designate him or her as your beneficiary.

If you are remarried, your beneficiary designations should be coordinated with your estate plan. For example, if you have one child from a previous marriage and you name your second spouse as the beneficiary of your life insurance, there is no guarantee that the spouse will use these funds to help support your child. Meanwhile, if you name your child as your beneficiary and they are under age 18, someone will need to be appointed as conservator of these funds, which could be their parent (your ex-spouse).

Estate planning is not for just the young or old, rich or poor, married or divorced, it is for everyone. You should take some time to think about who is important in your life and whether it is worth your while to ensure that they are provided for properly. Estate planning. Hopefully when you hear those words now, you envision yourself

*Source: 2002 Michigan Marriage Occurrence Marriage and Divorce Files, Vital Records & Health Data Development Section, Michigan Department of Community Health.

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Warner Norcross & Judd is a full-service law firm with offices in Grand Rapids, Holland, Metro Detroit and Muskegon. Because each business situation is different, this information is intended for general information purposes only and is not intended to provide legal advice.

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