When a person dies in Michigan, probate courts oversee the interpretation of the will and the distribution of the decedent's assets. If the person died without leaving a will (intestate), then their estate is dispersed according to the laws of Michigan probate. Probate laws can sometimes be heartless, so if you wish to have your estate distributed amongst your heirs as you wish, and not how the courts dictate, it is best to learn everything you can about how to avoid the undesirable event of your estate being placed in Michigan probate.
A Brief Overview of the Michigan Probate Process
When someone dies, a petition is filed with the courts to have their estate settled. Creditors and inheritors are notified, and the legal process of settling debts, paying any due taxes, and distributing assets to heirs begins. The petition is filed in the county in which the deceased lived at their time of death. In Michigan, probate administration may not always be necessary, especially if the individual owned no property or had any other assets in their name alone. An example would be if a married couple owned everything together, if one of the couple dies, ownership of the property or other asset passes automatically to the remaining partner, and there is no need for probate.
Much of an estate can be eaten up by the Michigan probate process if a person does not have a good understanding of the general procedure. It is always a good idea to hire a competent Michigan probate attorney to assist you when dealing with probate, and other professionals such as an accountant may be required. The more effort spent complying with probate requirements, the more you will spend on lawyers fees, but that can be balanced out by property and money saved and taxes avoided. Avoiding probate won't completely eliminate attorney fees; however it will reduce the cost of your probate administration fees.
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Ways to Avoid the Michigan Probate Process
There are a number of ways that the Michigan probate process can be avoided, however it is highly advisable to have the planning of your estate overseen by a probate lawyer. This is not legal advice, but an overview of ways a person can avoid having their estate go to probate. As mentioned above, if a person dies owning nothing in their name, there is no need for probate. But there are ways for property owners to avoid, and minimize the extent to which their estate is subject to the Michigan probate process. Some of these are as follows:
- POD (Paid on Death) Accounts – These are specific accounts that you can open with banks or other financial institutions that stipulate that the account ownership is transferred to a selected beneficiary in the event of your death. You can also add this stipulation to existing accounts in order to avoid having them subjected to Michigan probate procedures. Check with your bank or investment firm to see if they offer these accounts or this service, as not all firms do.
- Lifetime Gifts – Transferring ownership of any property you may own before you die is another way of avoiding Michigan probate. Designated as a lifetime gift, the property becomes exempt from probate, however there may be tax effects to consider, and you may not be able to take back the gift once given.
- Living Trusts – This is one of the most popular modern ways to avoid property passing through the Michigan probate system. Created while the estate holder is still living, the property is held in trust, and the ownership is transferred to the grantor (person who initiated the trust) as a trustee under the trust as a lifetime beneficiary of that trust. Income derived from the property now held in trust is paid to the beneficiary during their living years, and they also retain the authority to withdraw assets from the property. The grantor retains total control of the trust while they are alive, and can amend the terms or revoke the trust at anytime. Though setting up the trust may be costly initially, it is evident why it is a popular way of avoiding Michigan probate.
- Joint Tenancy Ownership – Property that is jointly owned by two individuals (or more) as "joint tenants" passes automatically to the surviving owner (s) in the event that one dies. A joint tenancy agreement can be drawn up for either real property (land, house), or personal property (investments, stocks, bonds). Though this is another common way of avoiding Michigan probate procedures, there are some drawbacks to joint tenancy. On sharing ownership with other individuals, one naturally gives up complete control of the property or assets shared.
It is wise to avoid certain aspects of the Michigan probate process, but before putting pen to paper, you should discuss any plans with an attorney well versed in Michigan probate law. Many options have excellent benefits, but may carry their own disadvantages as well, and there is no substitute for the experience and knowledge of a well qualified attorney.