Bruce R. Nichols Attends Advanced Negotiation and Dispute Resolution Institute

Bruce R. Nichols attended the Institute of Continuing Legal Education Advanced Negotiation and Dispute Resolution Institute in Plymouth, Michigan on March 17, 2011.  Four specialized tacks of alternate dispute resolution, plus a faculty of experienced mediators, arbitrators, and litigators, came together in this winner of an Association of Continuing Legal Education Best Award for Outstanding Achievement in Programming.  These uniquely crafted sessions combine lecture, discussion, and hands-on interactivity to help mediators learn and perfect new techniques.

Bruce R. Nichols Mediates for the 41B, 37th and 38th District Courts

Bruce R. Nichols, a trained and qualified civil mediator under the Michigan Court Rules, acted as mediator for the 37th District Court in Warren, Michigan in December 2010, the 38th District Court in Eastpointe in January, 2011, and the 41B District Court in Clinton Township in February and March, 2011.  As a neutral mediator, Bruce R. Nichols helps litigants settle their legal disputes, thereby avoiding the necessity of a trial between the parties.  Those parties settling their cases save time, attorney fees and a great deal of frustration with a negotiated resolution.

Nagging Issues of the Pretermitted Spouse

By Bruce R. Nichols, Esq.

Sometimes, case law twists the legal researcher’s mind into such contortions that a trip to the dentist seems like a welcome respite.   Such is the case with Estate of Sprenkel-Hill, 265 Mich App 254, leave denied, 478 Mich 998 (2006) which deals with the elective statutory share of a surviving spouse.  Citing no less than the Code of Hammurabi, the court found in Sprenkel-Hill that the modern elective-share statute reflects the contemporary view of marriage as an economic partnership and that the surviving spouse will need to be supported.  So far, so good.

Enter the issue of the “pretermitted spouse”.   A “pretermitted spouse” occurs where the testator and the surviving spouse were married after the testator executed his (or her) will.  Sure to strike a nerve in the families of remarried parents, this ‘pretermitted spouse” factual scenario was succinctly set forth in an unpublished opinion from the Michigan Court of Appeals in Estate of Cecil C. Warren,  No. 262937 (November 16, 2006) Cecil Warren executed his will and trust many years before his first wife died.  In his estate plan, he gave everything to his first wife, and if his first wife did not survive him (she didn’t), everything would go to his son from the first wife.

Warren remarried, never changed his estate plan, and predeceased his second wife.  The second wife got all bent out of shape because Warren’s son received the entire estate under the old estate plan.  The second wife says, “No way!  I get a piece of his estate as a pretermitted spouse!”  She points to MCL 700.2301, which provides for the recovery of an intestate share by the surviving spouse who married the testator after the execution of his will.

The son counters that she has not read the entire statute; and MCL 700.2301 (1)(a) says any intestate share that a pretermitted spouse receives is reduced by “..property devised to or in trust for the benefit of a child of the testator who was born before the testator married the surviving spouse and who is not the surviving spouses child”.  “And that would be me,” says the son.

Luckily for the son, and to his stepmother’s mortification, the Michigan Court of Appeals in Warren, supra, sided with him.  The surviving spouse is “toast” because the old estate plan was never changed and the statutory provision applies to children born before Warren’s second marriage.  While the second wife was in fact a “pretermitted spouse”, there was no share remaining for her to draw an intestate share from.  The son was the contingent beneficiary of the entire residuary of the estate.  Game over.

But, we’re not done.  Back to Estate of Sprenkel-Hill, supra, which goes on to say that a while a pretermitted spouse is entitled to receive an intestate share of an estate under MCL 700.2301, the surviving spouse can also claim an elective share under MCL 700.2202 if that provision yields a larger amount for the surviving spouse.  But, alas, through a story problem calculation only a fifth-grader could solve, the court in Sprenkel-Hill says the surviving spouse gets the larger of the two computed shares.  The court said “common sense” would interpret the legislature’s intent to insulate all spouses from disinheritance while allowing the decedent’s likely testamentary intent to be honored to the extent possible. Oh.., simple common sense comes to the rescue…well,maybe.

Throw in some inter vivos trust assets, a smattering of joint assets, a couple of creditors and a few non-spousal testamentary transfers, and you have a calculation that will send the most astute legal analyst reaching for the Excedrin.

Talking With Your Parents About Their Estate Planning

By Bruce R. Nichols, Esq.

For many adult children, their parents’ financial status is a guessing game.  Adult children may have qualms about butting into their parents’ financial affairs.  But often, older parents have usually thought a lot about these issues and are greatly relieved when their adult children show some interest.  Everyone needs an estate plan.  Without an effective plan, estate taxes and other costs can unnecessarily reduce the assets intended for beneficiaries.

Adult children remain reluctant to raise questions about their finances because they do not want to appear greedy or insensitive to their parents’ feelings.  They are concerned that their questions will be misunderstood or that parents may feel they are prying into private matters.  Raising the idea that your parents may someday be physically or mentally unfit to make their own decisions and act upon them will undoubtedly be disquieting for all of you.  The thought of death is even more uncomfortable.

But consider the alternative to ignoring this sensitive discussion altogether; if your parents do become incapacitated, the adult children could be forced into the time-consuming, expensive and embarrassing process of petitioning the probate court to declare them incompetent.  It would be necessary to appoint a guardian and conservator to manage the parents’  financial matters.  In Michigan, a public hearing before a probate judge is required to appoint a conservator.

Whatever the reasons a family may have for avoiding the topic of death or disability, it is vital to have an open discussion about family finances.  Parents and grown children should sit down for a discussion long before the need ever arises to apply the information.  This also makes it easier and avoids the inherent emotional strain of the conversation when all parties are competent.  It is necessary to discuss potential long-term care and retirement residences that can impact both the parents and the children’s financial resources.

You can insure that someone can step in if necessary to manage your parents’ finances by getting a lawyer to draw up a Durable Power of Attorney for them.  These legal documents, which empower the designated person to act on your parents’ behalf, automatically take effect should they become incapacitated.

The location of investment papers is also important.  The names of the financial representatives, bankers, stock brokers, and attorney is also important information.

An actual conversation with parents concerning this matter will be different from family to family.  Some parents feel comfortable letting their children know the actual value of their estate.  Others will feel more comfortable speaking in generalities.  After all, not many children can comfortably ask their parents “How much are you worth?” or “What amount are you  planning to leave me when you die?”  These are disturbing issues to confront in such a manner.

You might encourage your parents to grant a Medical Power of Attorney, which allows a trusted individual to make health care decisions on their behalf.  This is generally the easier discussion with parents, as few people seem to want to end up on life support for an indeterminate period of time.  This topic has had considerable media exposure recently.  As everyone seems to have an opinion about Dr. Kevorkian, robust discussion will usually follow.  Discussion concerning Living Wills can break the ice and allow for further discussion concerning estate planning topics.  It’s also even possible to tell your parents that you have a Living Will and you’d like to discuss your wishes with your parents.

In cases where adult children are working on their own estate plan, an opportunity exists which can serve as an excellent segue into issues of mutual interest with their parent – such as their own net worth, retirement plans and tax implications of their own estate.  It’s even possible that estate plans of parents and children can be a joint effort.

Another challenging topic for some families will be the division of the estate.  Some parents may leave more money to one child than another, feeling that one individual requires more financial help.  Money may be left to someone who is not a member of the immediate family.  To avoid hard feelings among family  members, it is often helpful to openly discuss these decisions.  Use caution in this area, since combining the emotional aspects of death and the topic of money gives you a volatile mix.

With proper planning, old age and sickness don’t have to go hand-in-hand with calamity and instant depletion of assets.  There are many methods to avoid these problems, but they must all be addressed before they are needed.

Lawyers have dedicated great time and effort to succession problems.  They have produced a variety of possible solutions.  The answer lies in matching the appropriate solution with each problem, and then applying the resolution in ways that are palatable to all parties involved.

The Ten Most Common Legal Traps To Avoid

By Bruce R. Nichols, Esq.

1) Fudge on your tax returns.  The Internal Revenue Service can become troublesome with very little provocation.  If you fail to pay taxes in a timely manner, they have all sorts of draconian penalties they can impose.  They can take property from you; and even put you in jail if you fail to file your return or violate certain provisions of the tax code!  Declare all your taxable income, take every possible allowed deduction, then pay the taxes in a timely manner.  You’ll find the IRS a lot easier to get along with if you follow this simple advice.

2) Regularly enter into “handshake deals”.  A simple written memorandum of an agreement, signed by the parties, can save considerable grief in the future.  It’s not that the parties don’t trust each other.  It is just a simple fact that people interpret things differently.  If an agreement is reduced to writing, the parties have to agree on the wording of the document.  That in itself requires some exercise mutual understanding.  Memories fail.  If the deal changes, memories then become selective.  Write it down and have both parties sign it!

3) Put all of your property in joint ownership to avoid probate.  While joint ownership may avoid probate, you may create more problems than you intended.  Probate is the legal process that settles your financial accounts after you die.  With joint ownership, the property simply goes to the surviving joint owner.  This can often be an excellent estate planning method.  However, one of the chief problems of joint tenancy is you give up full legal control over your property.  You also can assume liabilities that your co-owner may encounter.  For example, if you put your home in joint names with your children, and one of your children gets sued, you may end up paying the judgment to clear the title on your property.  And remember, once you place property in joint names, it requires signatures of all the parties to transfer the property.

4) Drink and drive.  The overwhelming majority of citizens are never charged with a crime.  Yet, sixty percent of Americans consume alcoholic beverages.  Driving while intoxicated has become a crime of targeted enforcement.  Some police officers literally are lying in wait for drunk drivers.  Drinking and driving is a losing proposition.  It is also extremely dangerous.

5) Ignore parking tickets.  After six parking tickets in the same jurisdiction, the Michigan Secretary of State will suspend your driver’s license!  You will not be eligible to drive a motor vehicle until you pay the tickets.  The parking tickets also accrue penalties and interest at a rapid rate.

6) Fail to incorporate your business.  Corporations provide a shield of liability for business owners.  Forming a corporation is simple and inexpensive.  If you do not utilize the corporate form in your business, you put all your assets on the line in each business transaction.  With corporations, your liability is limited to the assets in the corporation.

7) Fail to shovel your snow.  Some lawyers and scholars will go into long-winded dissertations about the “natural state” of snow.  They say if you just leave the snow where nature placed it, you have no liability if someone slips.  This philosophical approach to acts of nature will get you in a lawsuit in a hurry.  This is a very litigious society we live in.  If someone slips and is injured on your property, it’s very likely you will get sued!  Then you and your insurance company can discuss the “natural state of snowfall” in front of a judge.  Maybe you’ll even be lucky enough to have a jury trial to discuss the matter.   Keep your driveway and sidewalks clear of snow.  Avoid the problem in the first place.

8. Don’t carry adequate liability insurance.  Imaginative lawyers can come up with all sorts of theories of liability.  You may not have done a thing within 50 feet of an injured party. Nevertheless, the tentacles of a lawsuit can spread to all parties even remotely involved.  Purchase adequate liability insurance.  The insurance also pays for your legal defense.  While you may not be liable, it could cost thousands of dollars in legal fees to defend you.  Let your insurance company defend it.

9) Encourage your family members not to plan their estates.  Failure to have a properly drafted estate plan usually results in chaos.  If an individual owns property, and does not have a will, it will be necessary to go to probate court to straighten things out.  You will then enter into a netherland of lawyers, judges, bureaucrats and tax collectors which is usually bewildering and horribly expensive.  A properly drafted estate can save an incredible amount of time, expense, and frustration for your heirs.

10) Contemplate divorce.  Anyone consulting an attonrey about divorce will be questioned about marriage counseling.  Divorce is a gut-wrenching, money draining, emotional roller coaster that could become the ride of a lifetime.  It is most certainly a matter not to be taken lightly.  If someone is having marriage problems, it would be wise to exhaust every possible avenue of reconciliation.

Common Mistakes in Making Beneficiary Designations

By Bruce R. Nichols, Esq.

Maybe you have completed a complicated estate plan which contains a forty page trust, a carefully considered will, and a complete list of personal property to be distributed. And now you can forget about it because everything is in order, right? Well, maybe. In most cases, those documents will have no effect on your life insurance policies or retirement plan beneficiary designations.

Investments in IRA’s and 401(k) plans often are the single largest investment asset a family may have. Often, the largest and most immediate source of cash in a decedent’s estate is a life insurance policy. But many individuals misunderstand the legal and tax ramifications of their beneficiary designations.

While insurance policies and retirement plans are considered part of your estate for tax planning purposes, they are uniquely titled, and therefore are not distributed under the terms of your will. The only way to be sure that your heirs receive your property as you desire, is to pay close attention to retirement plan beneficiaries and insurance policy beneficiaries.

Here are some of the most common mistakes in the designation of beneficiaries:

• Failure to name a beneficiary. Just purchasing the insurance policy or enrolling in the retirement plan is not enough. You must specifically set forth the beneficiary who will receive these funds upon your death. If you fail to do so, your estate will be headed for a complicated and costly trip through probate court.

• Failure to name a secondary beneficiary. If the primary beneficiary predeceases you, the secondary beneficiary will receive the money. If you fail to designate a secondary beneficiary, the proceeds will go back into your estate and through the probate court process.

• Failure to carefully designate beneficiaries. The legal consequences of beneficiary designations are often ignored. Common problems include the naming of minor children as beneficiaries. In Michigan, those children will have complete control of the IRA and insurance proceeds when they reach 18 years old. Your will and trust will have no effect on these beneficiary designations, as the assets pass outside the will.

• Failure to change beneficiaries. Life is constantly in flux. Marriage, divorce, children, grandchildren, illness, are just some of the events which can trigger changes in your estate plan. Failure to keep up with these changes can result in your leaving assets to unexpected beneficiaries.

• Naming Your Estate as Beneficiary of Your Retirement Plan. It is possible that the naming of your estate as a beneficiary of your IRA or 401(k) can result in the immediately liquidation of the retirement account. All income taxes and estate taxes are then immediately due. Spouses may “roll over” a retirement plan tax free on the death of their spouse. Other beneficiaries have different rules and cannot simply “rollover” IRA benefits. Naming specific beneficiaries of the retirement plan will usually allow the tax-deferred accumulation of these benefits.

Remember!
Your will or trust will not change a beneficiary designation on an insurance policy or retirement account!

Michigan Statutory Will and Appointment of Patient Advocate

If your estate is simple and your family is “traditional”, you might want to consider the Michigan Statutory Will.  Take a look at the attached site.

State of Michigan Statutory Will Website

Bruce R. Nichols as Civil Mediator

Bruce R. Nichols has completed the General Civil Mediation Training and the Master Class – Advanced Mediation Training of the Institute of Continuing Legal Education. He has completed all qualifications required to act as a general civil mediator in the Michigan court system. His specialty areas of mediation are wills, trusts, construction, real estate development, landlord-tenant, real estate disputes, and real estate broker/agent/owner conflicts.