Everyone needs a will. If you didn't write one, the state has prepared one for you and it may well not distribute your assets as you would like. Any assets passing by the terms of your will are guaranteed to go through probate. That is what probate court is there to do - make sure that an individual's estate is transferred according to the terms of his/her will. You can arrange for you assets to avoid probate, but everyone needs a will to catch any assets that were neglected, forgotten or received after death.
NOT ALL ASSETS NEED TO BE PROBATED.
In Michigan, not every type of property has to be probated. Bank accounts that are owned jointly, CDs or stock accounts that have rights of survivorship do not have to be probated. The same holds true for property if there is more than one name on the deed. If you have a life insurance policy, IRA, pension, etc. that names someone as your death beneficiary, they will automatically be entitled to the asset after your death. Even real estate, not jointly owned, can avoid probate if the right type of deed is written.
BENEFICIARY DESIGNATIONS MUST BE CAREFULLY EXAMINED AND EXECUTED.
Most of the above assets transfer without probate because they have a beneficiary designation. Sometimes, if no beneficiary is named, it is assumed that the account should go to the spouse or to the estate. If the beneficiary is the estate, it will go through probate. This defeats the purpose of designating a beneficiary.
JOINT OWNERSHIP IS NOT ALWAYS A GOOD IDEA.
Although holding title or an account in joint ownership can avoid probate, there are risks involved because you have actually handed over ownership rights to another and can experience some loss or lack of control. The account or property is subject to withdrawals or transfers by the joint owner and to the claims of creditors or divorcing spouses and possible tax consequences. You may also be limiting your access to government benefits such as Medicaid for nursing home care. You should carefully consider the advantages and disadvantages before making any decision to add joint owners to the title of your assets and of course we always recommend that you discuss your situation with an attorney.
IS IT NECESSARY TO AVOID PROBATE?
Probate is always time consuming and delays the distribution of assets, but is not necessarily expensive. You may even appreciate having a judge to help manage some difficult family members. In Michigan, filing for a probate estate costs $150.00 Certified copies of letters of authorization for the Personal Representative are $12.00 each. The publication of notice to creditors costs about $50.00. There is also an inventory fee which is assessed on a sliding scale. The inventory fee for an estate of $100,000.00, for example, is $362.50. The actual probate fees, as you can see are not excessive. The main expense will be in attorney fees to have someone guide you the administration and paperwork and assist with any litigated matters.
SO WHY WOULD I WANT A TRUST?
A trust gives you the opportunity to plan to provide for yourself, your spouse and dependents during any period of incapacity that you may go through. With a trust, you have named the trustee or trustees who will manage your assets for your benefit and continue to care for your property and finances. The trust will give instruction to your trustee(s) to carry on the way you would.
After your death, the trust, though its trustee(s) will continue to manage your assets for the benefit of those you have named as beneficiaries. It is not necessary to just hand out everything in lump sums and hope that your beneficiaries know how to handle money. Creditor protection and management can be arranged for those who cannot manage for themselves whether because of age, temperament or incapacity. The trustee can distribute your assets according to your directions to encourage education or personal development or just to assist someone who is disabled the way that you would .