Best Ways to Avoid Probate in Michigan

Read on for the best ways to avoid probate in Michigan.

The Revocable Living Trust

The best way to avoid probate is to transfer property to a revocable living trust. A trust is a written document. A “grantor” or a “settlor” creates the trust. The trust identifies heirs and the successor trustee who is in charge of transferring property after the grantor’s death. The trust holds property in its name during the lifetime of the grantor for the benefit of the heirs.

A trust is “revocable” because the grantor reserves the right to make changes. However, if the grantor becomes disabled or dies, the trust becomes irrevocable and the grantor’s wishes are carried out. Properly funded trusts avoid probate and are also excellent methods to provide for minor children. A trust can hold property for the benefit of children with distributions when they reach a certain age. For example, 50% when the child reaches age 21 and the balance at age 25.

Trusts can own real estate, bank accounts, stocks, investment accounts and can also be beneficiaries to life insurance policies. We don’t recommend naming a trust as a beneficiary to a qualified retirement plan like a 401(k).

Beneficiaries and Transfer on Death Accounts

Having a beneficiary on a financial account, IRA, retirement plan, bank account or life insurance policy avoids probate. Upon death, the assets pass to the named beneficiary. Potential problems include naming children, the beneficiary dies, or the company loses the beneficiary designation paperwork. A transfer on death (TOD) is the equivalent of a beneficiary designation.

Potential problems include naming minor children or the beneficiary dies before you. We have on occasion also seen companies lose the beneficiary paperwork and needed to probate the account. Finally, when you need to change the beneficiary, you must properly complete the necessary paperwork properly.

The Lady Bird Deed

The lady bird deed, legally known in Michigan as an enhanced life estate deed, allows the owner of real estate to retain a life estate in property and while naming a remainderman to receive the property upon the owner’s death. In simpler terms, it is a beneficiary deed. Think of it as being similar to a life insurance policy in which the beneficiary does not get the proceeds until the owner passes away.

This type of quit claim deed is an efficient and relatively inexpensive way to transfer real estate to an heir while preserving Medicaid asset eligibility for a homestead. However, changing your mind requires the preparation and filing at the register of deeds.

Deceased Vehicle Owner

When a vehicle owner dies and the estate is not probated, the surviving spouse or the next closest kin may transfer the vehicle into their name. Present the title, registration or license plate number along with a copy of the death certificate to the Secretary of State. The surviving spouse or next closest kin will complete a Certification From the Heir to a Vehicle form.  If the vehicle is being transferred to the surviving spouse or an immediate family member, the license plate may remain on the vehicle.

Final Paycheck and Wages

If an employee dies and the employer owes a last paycheck, payment can be made in the following order to the employee’s spouse, children, parents or siblings.

Transfer by Affidavit in Michigan

An estate that does not include real property may qualify for transfer by affidavit and avoid probate. Twenty-eight days or more following the decedent’s death, a person holding the decedent’s property must deliver it to the decedent’s successor when the successor presents the death certificate and a sworn statement. MCL § 700.3983. The sworn statement form is titled Affidavit of Decedent’s Successor for Delivery of Certain Assets Owned by Decedent (PC 598), and must be signed before a notary public.

However, banks, credit unions, and other financial institutions often require a Letter of Authority issued by a probate court judge before assets are released.

A Last Will and Testament Does Not Avoid Probate

A Will never avoids probate. If fact, it guarantees probate. It is a letter of instruction to a probate court as to the distribution of property. While a Will nominates a Personal Representative, it is the probate court judge who appoints the Personal Representative. Until this appointment, the Personal Representative does not have any authority. We always recommend at the very minimum everyone should have a Will just in case.

Avoid Joint Tenants on Property

We discourage naming a child or sibling as a joint tenant on a deed or bank account. The danger outweighs the benefits. What can go wrong? If your child gets sued or files for bankruptcy, your property can be garnished. These are real examples. Consider a Power of Attorney giving a designee authority to handle your affairs during your lifetime. Making them a co-owner is not necessary.

And the Best Way to Avoid Probate Is?

Of course, the best way to avoid probate in Allen Park or the Downriver area in Michigan is to meet with the attorneys at the McAvoy Law Firm. We review your assets and goals and make recommendations as to what estate plan is right for you. As a general rule of thumb, the less you plan now, the more expensive it is later for your heirs.

Ready to talk? Give us a call at 313-291-0240.

Chris McAvoy is a  Michigan attorney who helps people with bankruptcy, divorce, and estate planning. To find out more or set up an appointment, click here for contact info. Our attorneys help people in Taylor, Allen Park, Southgate, Lincoln Park, Riverview, Taylor,  Trenton, Flat Rock, Wyandotte, Brownstown, Belleville, Dearborn, Dearborn Heights, Westland, Garden City,  Canton and the Downriver, Michigan area.