PROBATE / TRUSTS / WILLS
PROBATE TRUST WILLS SPECIALTIES DEFINED
Judy Coleman has 25 years of concentrated experience in probate, trusts, wills and estate planning particularly involving the following:
POWER OF ATTORNEY
GUARDIANSHIP / CONSERVATOR / CUSTODIAN / FIDUCIARY
LIMITED GUARDIANSHIP OVER MINORS
TRUSTS ASSETS / REAL ESTATE / EQUITY
TAXABLE LIFETIME GIFTS
LIFE INSURANCE BENEFITS
GENERAL POWER OF APPOINTMENTS
STOCKS & BONDS CERTIFICATES
LONG TERM CARE INSURANCE
DESIGNATION OF PATIENT ADVOCATE
DURABLE POWER OF ATTORNEY FOR HEALTHCARE
ELDER LAW / ELDER ABUSE / ELDER NEGLECT
FAQ: Probate Trusts & Wills
Q: Can my estate avoid paying an executor's fee?
A: Probate laws differ from state to state. The following discussion applies to residents of Michigan.
You can write a will that denies or limits compensation to your executor. You may appoint your spouse or another beneficiary as executor, and a beneficiary is often quite willing to serve for free. If the executor is the sole beneficiary of the will, then an executor's fee may not be important to them, because it will come out of the same funds he would otherwise receive as a bequest. If your will leaves property to multiple people, any one of them might be very motivated to become the person to be appointed in this important position to be in charge with or without any fee to do this. Michigan law does not disqualify a beneficiary of the estate from serving as executor merely because he is a beneficiary.
If you do deny compensation to your executor, your lawyer will probably suggest that you make an exception for professional executors (banks, trust companies, etc.), because they will not serve without compensation. Even if your will does not appoint a professional executor, the probate judge may be obliged to appoint one because of unforeseen circumstances (for example, all of the executors you name might be unwilling or unable to serve). Although this is unlikely to happen, you should not leave your estate unprepared to deal with any situation.
Q: How can I save on overall estate taxes and fees?
The estate tax rate is now 35%. Your estate gets to take various deductions before applying this rate.
The estate gets a deduction equal to the amount of property or cash passing to your spouse. It also gets a deduction equal to the amount of property or cash passing to a qualified charity. In addition to both of those deductions, it gets what is effectively a $5 million standard exemption for all other property.
Each taxable gift you make during your lifetime uses up some of your estate tax exemption. If you make less than $5 million of taxable gifts during your life, the amount of taxable gifts you have made is simply added to your estate total when you die, and that's when you pay tax on them. If you make more than $5 million of taxable gifts, you have to start paying taxes on them during your life.
This system suggests two obvious ways to save estate taxes: Leave your entire estate to either your spouse or charity. But it also suggests a few more subtle ways, too.
1. Leave $5 million to a Bypass Trust, and the rest to your spouse.
If you leave everything to your spouse, you get a full marital deduction, but you may waste your $5 million exemption. (I say "may" because new legislation is meant to help preserve this exemption in some cases. Currently, the legislation has limited application and will expire unless extended by Congress.) By leaving the exemption amount to a trust designed to bypass your spouse's estate, you might save over a million dollars in estate taxes.
If a married couple have a joint net worth of $10 million. If the husband dies first and leaves everything to his wife. Estate tax owed: zero, because of the marital deduction. The wife now owns $10 million. She dies under circumstances where her husband's exemption is not preserved, leaving her gross estate of $10 million to their children. Because of the $5 million exemption, her taxable estate is only $5 million. The tax on this is $1,750,000.
If that husband leaves $5 million to wife, and $5 million to a trust that will pay all of its income to Wife as long as she lives, and then go to their children when she dies. The estate tax owed: still zero, because the marital deduction eliminates the tax on the first $5 million, and the standard exemption eliminates the tax on the second $5 million. The bypass trust is not considered to be owned by Wife at the time of her death, so her gross estate is only $5 million. After subtracting the standard exemption, the taxable estate is zero. Estate tax owed is zero. The bypass trust has saved them $1,750,000.
2. Lifetime Gifts.
The first $13,000 of every gift you make to each person each year is excluded from your taxable gifts total. If you and your spouse have three children, you could jointly make $78,000 in gifts to them each year, and these gifts will be completely excluded from your taxable estate. They won't even count against your estate tax exemption.