Estate planning can be one of the hardest topics to talk about. No one likes to confront their own mortality, but there are several things you can do to make it easier on the loved ones you leave behind.
Prepaid funeral arrangements
Arranging for your funeral can be done at any point in your life and can help ensure that your arrangements will be taken care of later. The type of funeral service, the location of your grave, and even what kind of casket or urn you will have can all be planned and paid for in advance. Funeral planning will save friends and family from having to figure out these details in their time of grief.
In Michigan, when you prepay for a funeral, the funeral home may secure your funds in a couple of ways. The funds could be used to purchase a life insurance policy with the funeral home named as the beneficiary, or the funds could be placed in an escrow account in low-risk investments. Funeral homes that use the latter option have a yearly examination by an accountant to ensure your deposit is handled appropriately.
Prepaid funeral arrangements can be guaranteed or non-guaranteed.
- A guaranteed contract means that the funeral home will perform the services you agreed to regardless of the current cost of those services. These types of contracts are an excellent way to ensure there will be no additional expenses for your funeral, but excess funds will not be refunded to the family.
- A non-guaranteed contract will apply the balance of the funds deposited and their earnings toward the current cost of the funeral. With this option, there may be a balance due or a refund of an overpayment.
Either option will allow you to preplan your funeral. Irrevocable funeral contracts are an option for individuals who are on means-tested assistance. These types of contracts cannot be canceled, but can use up excess funds the individual may have received and plan for their funeral at the same time.
Wills, trusts, and designated beneficiaries
A will is a legal document declaring what a person wishes to happen to their property, and a trust is an arrangement where a designated person (or persons) manage assets for the good of one or more beneficiaries. Probate is a court process that handles the distribution of a decedent’s property. A will is still subject to probate but gives direction as to the estate’s executor and how the assets will be distributed.
One way to avoid probate is to transfer all assets into a revocable trust, sometimes referred to as a living trust. The trust document will determine how the assets and income of the trust are to be distributed, name the beneficiaries, and designate a trustee who will manage and execute the trust. Often, living trusts are used in conjunction with a pour-over will that simply designates that any remaining assets in the decedent’s estate will automatically transfer to the trust.
Several account types have their own designated beneficiary and are not subject to probate. These include life insurance policies, some bank accounts, and retirement plans with beneficiaries or payable-on-death designations. For these accounts, it is very important to keep the beneficiary information up to date with your wishes.
For every business owner, it is a good idea to have a long-term succession plan for eventual retirement and an emergency succession plan in case of a sudden emergency. A long-term plan allows you to lay out the future of your business and your involvement in it. Will you eventually sell the business to fund retirement or pass it on to the next generation? Whichever option you elect, planning options are available to help you along the way, including business valuations and gifting. Sometimes, things do not go according to plan, and an unexpected death can leave your business in disarray. Having an emergency succession plan mapped out can give employees and family members guidance and stability while ensuring everything will be handled how you would want.
Which options are best?
The options listed above each have pros and cons that fit different situations and should be considered carefully. Yeo & Yeo’s Trust and Estate Services Group can help you evaluate the best options to serve your situation. Please reach out to us at 800.968.0010.