For some individuals, privacy in all aspects of their lives is very important for them. In some cases, individuals may avoid social media accounts and limit their online presence because they desire to keep their lives private from the public. Unfortunately, when you die, you may not have a choice in whether your personal finances and desires for your estate remain private unless you take steps now to keep your estate private.
Wills are Not Private Upon Death
When you pass away, your executor or personal representative must take the original copy of your will to the probate court to open a probate estate. The will is filed with the court and becomes a part of the permanent estate record. After an estate is opened, the administrator of your estate must complete certain probate forms that provide a list of your heirs and an inventory of your property. The forms that the administrator completes also become part of the estate record.
Probate estates are considered public record, meaning anyone can view the records for your probate estate. Sadly, the public nature of estate proceedings can cause conflicts between family members who may be unhappy at receiving very little or nothing from your estate. In other cases, someone may review your probate estate to take advantage of certain heirs.
If you do not want family members or the general public to have access to your estate plan, you must take steps now to keep your financial information private, even after your death. There are several ways that you can keep your information private by avoiding probate.
Ways You Can Avoid Probate
Transferring property directly to heirs outside of probate is one of the best ways to keep your estate private after your death. There are two very important tools you may want to consider — beneficiary designations and trusts.
- Beneficiary Designations
With beneficiary designations, you can pass property directly to another person outside of probate. Not all financial accounts allow for beneficiary designations. However, for all accounts that permit a beneficiary, you can avoid probate by naming a beneficiary. Common examples of accounts with beneficiary designations include:
- Life insurance policies
- Retirement accounts
- Health Savings Accounts
- Some Bank Accounts
You should work closely with our office to identify which accounts allow for a beneficiary designation.
- Trust Agreements
With a trust agreement, you can leave property to an heir just like a will with one major difference. Trust agreements are not probated and are not part of the public record. If you utilize a trust, you may be able to avoid probate for all or most of your assets. A few assets may not be able to be placed in a trust; however, some of those assets have beneficiary designations. If you have a trust, there could be very little or no property to probate thereby keeping your estate private after your death.
Most individuals use a Revocable Trust Agreement (Living Trust) or an Irrevocable Trust Agreement. Both trusts offer various benefits, as well as certain disadvantages. You should consult with a Michigan estate planning attorney before executing any trust agreement to ensure that you are choosing the best option for you and your family.
A Revocable Living Trust can be altered or voided during your lifetime. Assets in the trust pass directly to the beneficiaries of the trust without the necessity of going through probate. However, the disadvantage of a living trust or revocable trust is that the trust does not protect your assets from your creditors. Therefore, your creditors can file claims against the assets in the trust to collect unpaid debts.
With an Irrevocable Trust Agreement, you cannot change the terms of the trust after it has been signed. The assets held by the trust cannot be removed from the trust. Once you die, the trust is administered according to the terms you outlined in the trust. You might direct that the irrevocable trust is used to fund several different irrevocable trusts to support your heirs. You have the choice of how the assets in the trust are managed or distributed after your death.
Another benefit of an Irrevocable Trust Agreement is that it protects the assets in the trust from your creditors. In most cases, the trust can also protect the assets from the creditors of your heirs. This benefit is significant if your heirs have many creditors or you believe there could be substantial claims filed against your probate estate.
When you die, a trustee you appoint in the trust agreement assumes control of the trust to administer the assets according to the terms of the trust. Only the trustee and the beneficiaries of the trust ever know the terms of the trust or the property held by the trust. Therefore, using an Irrevocable Trust Agreement can give you the flexibility you desire to provide for your loved ones after your death without making your financial affairs a matter of public record.
Choosing Your Estate Planning Tools Carefully
The above discussion of how to avoid probate is a general overview. You should consult with a Michigan estate planning attorney before you begin executing any documents to create a will or a trust agreement. If you want to avoid probate, protect your assets, and provide for your family, you must engage in careful estate planning, including discussing the potential benefits and risks of an Irrevocable Trust Agreement.
If you value personal privacy, we want to help you protect your privacy even after your death. Contact Longstreet Elder Law & Estate Planning at 269-945-3495. Your consultation is strictly confidential.