by Christine Steinmetz, J.D., Hotline Attorney

This is the final post in our series regarding wills, trusts, and estate planning. Other posts in the series can be found here.

In our previous posts, we discussed the different types of wills and trusts. There is one other estate planning document that we haven’t discussed that allows you to transfer real estate to your beneficiaries without probate. This document is called a “Lady Bird” deed. A “Lady Bird” deed transfers real estate after your death automatically to the person or persons named in the deed. There are several benefits to the lady bird deed besides probate avoidance. It also gives you creditor protection from the creditors of the person to whom you leave your property to. The “Lady Bird” deeds also allows for flexibility and you can change your mind after you sign the “Lady Bird” deed.

“Lady Bird” deeds can be a helpful tool in Medicaid planning. Medicaid rules prohibit a person from transferring assets in the 5 years before applying for Medicaid. However, a “Lady Bird” deed is not a transfer because you keep complete control over the property. “Lady Bird” deeds are complex, therefore, you should consult with an attorney that is familiar with the “Lady Bird” deeds.

Below is a list of the other estate planning documents that we discussed in our previous posts and a summary of what each of the documents can do. One thing to remember is that a will always goes through probate. Whereas, a trust, if set up properly, avoids probate.

• Last Will and Testament: Your Last Will and Testament is a legal document that contains your instructions about how you want your assets (also known as your estate) distributed upon your death. A will allows you to choose who is to receive what share of your property. A will is only effective upon your death. Therefore, during your lifetime you can amend or revoke your will.
• Codicil: A codicil is an amendment or change to your will. It is a separate legal document that references the will and makes the necessary changes.
• Testamentary Trust: A testamentary trust is trust that is contained in a will. A testamentary trust is not funded until after the death of the testator. The main disadvantage of a testamentary trust is that it does not avoid probate, and the trust along with the assets used to fund the trust are not confidential once they are probated. A testamentary trust is different from an inter vivos or revocable living trust.
• Living Trust: A trust is a written document that creates a relationship in which a person (or business) holds title to property for the benefit of another person. The terms of the relationship are described in the trust document, also known as the trust agreement. A living trust, also known as an inter vivos trust (latin for “between the living”), is a trust created during the lifetime of the grantor. A living trust avoids probate.
• Revocable Grantor Trust: The Revocable Grantor Trust is a specific type of trust. The creator or grantor is the trustee of the trust and is the sole lifetime beneficiary. These trusts contain terms stating that the grantor can revoke or amend the the trust at any time until he or she dies or becomes legally incapacitated. A successor trustee is named to serve as trustee if the grantor becomes disabled or dies. Most clients choose the revocable grantor trust because it gives the grantor flexibility with his or her assets and allows them to make changes to the trust agreement and to avoid probate.
• Pour-Over Will: A pour-over will transfers any property solely owned in the name of the creator of the trust at the time of death. The pour-over will “pours” the probate estate over into the name of the trust. Although the grantor may have transferred all of his or her assets to the trust to avoid probate, a pour-over will is needed to act as a safety net, catching any property not transferred into the name of the trust during the creator’s lifetime.

The purpose of this blog was to provide you with general information regarding the different estate planning documents. Anyone over 18 years old can make an estate plan to insure that their wishes are followed and their loved ones are protected. We strongly recommend that a you consult with an attorney who specializes in estate planning to assist you with your personalized, individual plan. If you have questions regarding wills, trusts, or estate planning, please contact the the Legal Hotline for Michigan Seniors at 800.347.5297 and our hotline attorneys will be happy to answer your questions.