Buying a new home is an exciting time. Setting up the rooms, getting the landscaping just right, and settling in – it’s all the beginning of a new chapter. But with the state of any new chapter, you should consult your financial advisor and your estate planning attorney about how this milestone can affect your estate plan. When you buy or sell a home, it’s time to update your plans.
UPDATING YOUR WILL
You should include all of your major assets in a will or trust. If you die without a will, the court will appoint a personal representative for you and distribute your estate according to Michigan law and the Estates and Protected Individuals Code (EPIC) code. Your assets, including any real estate, may be sold to distribute to your heirs. If you want the property to pass to a particular person, a will is one way to ensure it happens. If you own the house jointly with a partner or spouse, the home will pass directly to them upon your death.
USING TRUSTS EFFECTIVELY
One good way to avoid probate and inheritance taxes is a living trust. You create the trust, appoint yourself as a trustee, and place all of your assets into the trust. You can name a trustee to take over if you die or become incapacitated. You can also dictate how the trustee will distribute the assets or income in the event of your death. You effectively still control all of your resources during your lifetime, and the trust assets avoid probate after your death.
However, a living trust may not protect your assets from creditors. If you encounter financial difficulties, later on, a creditor can go after the assets in your trust. Normally, Michigan law protects the “homestead” in bankruptcy or creditor actions to a certain extent. If a trust owns your property, the homestead exemption will no longer apply. The homestead exemption attaches to the owner and not the property itself. However, an irrevocable trust may be able to protect your assets from creditors.
As you can see, owning property will affect the development of your estate plan. In coordination with your financial advisor, a skilled estate planning attorney can develop an estate plan that best fits your family’s needs. Whether you need to create an estate plan or modify an existing plan, Dallo Estate Planning can help.