When a person dies, the court supervises the distribution of assets and settlement of taxes and debts. This process, called probate, can be lengthy and expensive.
These estate planning strategies can help your beneficiaries avoid the probate process in Michigan.
Establish a trust
Michigan allows assets held in a trust to bypass probate. You can create a living trust, then transfer property to ownership of the trust. The trust documents indicate who will receive specific assets upon your death and name a trustee to administer the trust property. You can change or update a living trust at any time.
Name account beneficiaries
You can also avoid probate for some types of accounts by designating beneficiaries. The person you name to inherit the account can claim it outside of probate with a court affidavit. Examples in Michigan include:
- Life insurance policies
- Retirement plans, such as 401(k) and IRA accounts
If you own bank or investment accounts together with your spouse or another person, he or she will receive the proceeds under Michigan’s right of survivorship.
Give during your lifetime
You can take advantage of gift exclusions to pass along assets during your lifetime and save on taxes. Doing so can help you avoid probate by reducing the size of your estate below Michigan’s required threshold, which is $24,000 for 2022. Also in 2022, you can give up to $16,000 to each individual tax-free up to a total gift tax exclusion amount of $12.06 million.
Understanding these strategies to avoid probate can help you create an estate plan that fits your needs.