Michigan residents may wonder exactly what estate planning entails and whether it is necessary for them. Simply put, estate planning is a way for a person to decide during life how any assets should be distributed following their death. A detailed estate plan may cover both current assets and those that a person expects to receive. In some cases, a person can choose to structure the plan in order to avoid probate, which can be time-consuming or expensive.
Some people design their estates in a way that will help them avoid or minimize estate taxes. For example, a person who establishes a charitable trust may not pay any estate taxes. However, that person would be giving up control over the assets and how they are distributed. It is unfortunately a common mistake for people to try to set up complicated plans when a simpler vehicle, such as traditional life insurance or a trust, would serve the person's purposes just as well.
Another option for many people is to structure their estate plans to keep funds safe from creditors. A person with that goal may benefit from looking at gift transfers, private placement life insurance, dynasty trusts or foreign grantor trusts. These vehicles are not simple, but wealthy individuals may benefit from using them if the intent is to both reduce taxes and keep assets from being taken to pay creditors.
An estate attorney may be able to help those preparing their estates avoid some common pitfalls. It may be possible to review the client's individual needs and help suggest the right tools to meet those objectives. Once a plan is established, an attorney may be able to help execute it and review it periodically to ensure that ongoing needs are met.
Source: Forbes, "What Is Estate Planning?", Russ Alan Prince, November 04, 2013