The Trouble with Naming Guardians

    Selecting guardians for their children is frequently one of a client’s most difficult decisions in the estate planning process. The decision is complicated by a desire to name those people the client feels will be the best surrogate for their children, without offending other family members or loved ones. Members of two families usually feel they are better suited to be named guardians than other family members. It is possible, for many reasons, that a nonfamily member is the best person to be named guardian.

   Each set of grandparents may feel they are best able to be guardians of their grandchildren. Hard feelings can result if the client chooses one set of grandparents over the other. However, due to age or other factors, grandparents may not be the best guardians, even though they unrealistically feel that they are. The clients must consider the needs of their children and if grandparents could realistically meet those needs. 

       If another family member is considered, it may still create issues. The client may desire to name one of the client’s family members (such as a sister) and spouse as guardian, but does not want the sister’s spouse to serve alone if something should happen to the sister. In this situation, we will frequently name both the sister and her spouse as initial Guardians as a team, but name contingent guardians if those named cannot serve as a team. If there is a divorce or the spouse has died, the sister need not feel she has the additional obligation of guardianship. 

     Often a client will delay making a guardianship decision when they are not comfortable with any of their relatives or when relatives do not live in the same area. The clients believe that it would be unfair or unwise to relocate their children, who are already dealing with the loss of their parents. Close friends, living in the area, may actually be the ideal guardians in this case. In these circumstances, the client can name those geographically distant relatives as secondary Guardians. The client can then explain to their relatives that while the continued connection with their family is important, the client believes that being able to remain in a familiar comfortable environment will be more conducive to their children's well-being. 

       Ultimately, just as with any other position of responsibility in the estate plan, we remind our clients that whatever decision they make should be made with the best interest of their loved ones in mind. If there is a person who the client would not want as Guardian it is better not to name the person and risk offending them than name someone the client is uncomfortable with caring for their children. We always hope the decisions a client makes in naming a Guardian for minor children will never be needed. When the day comes when a Guardian is no longer needed, we remove that language from the estate plan so that no one will ever know that the client did not want them to care for their children.

Matt Ferrara

The Effects of Divorce on Estate Planning

     Divorce is frequently a difficult and painful experience for the parties involved. By the time the proceedings are complete, most people want to go their separate ways and interact with their former spouse as little as possible. Unfortunately, as with other major life events, divorce is also a time where it is important to review and update an existing estate plan.

Under Michigan law, divorce has a substantial effect on existing estate plan documents, including:

• automatic revocation of any potential disposition of property made by a divorced individual to his or her former spouse as a beneficiary under a Will or Trust;
• automatic revocation of provisions conferring powers of appointment on the divorced individual’s former spouse so that the former spouse can no longer appoint beneficiaries under a Will or Trust; and
• revocation of any nominations of the divorced individual’s former spouse to serve in a fiduciary or representative capacity rendering the former spouse unable to act as Personal Representative or Trustee even though named in the document.

     Additionally, divorce severs interests of a former spouse in property held at the time of divorce as joint tenants with rights of survivorship, and it is important to retitle real estate following a divorce. While all of these changes result in a change in the distribution of assets via estate plan documents, they do not negate the documents themselves, therefore the documents continue to function and successor beneficiaries, including minors, may become the primary beneficiaries because of the divorce. If there are no successor beneficiaries, then the Intestacy Statute dictates distribution of those assets.

       Presuming that successor beneficiaries are named, the change in beneficiary is important because in many documents there is a presumption that should something happen to the Grantor their now former spouse will receive such distributions and the terms of the trust did not adequately provide for direct distribution to minor children. Further, even when there is adequate provisions for maintain assets in trust for minors, it is important to ensure that the trustee named to administer that trust is a person the Grantor believes will look out for the best interests of any children and ensure funds are available for their long-term care. It is worth mentioning that a decree of divorce may contain provisions requiring the inclusion of certain provisions in an estate plan, including the purchase of life insurance to cover alimony or child support payments should something happen to the Grantor. Failure to comply with such requirements can have adverse consequences.

     While a review of the terms of the Trust, the beneficiaries, and the successor trustees is important, it is just as it is important to ensure those individuals who are designated to make decisions upon incapacity are also the people the Grantor now wants to make decisions on their behalf. Many people execute Patient Advocate Designations and Durable Powers of Attorney naming their spouses as the sole designee to make decisions on their behalf. Following a divorce those documents are revoked and the grantor is left without a designate to make medical decisions. Even if those documents name other successor designee, it is important to ensure that those individuals are still the best people to be making decisions should the Grantor become incapacitated. Frequently successor designee's are close friends of the couple, who may not continue to be actively involved in their separate lives following a divorce.

      As a side note, it is important to remember that in addition to revoking all the above interests held by former spouses, divorce also revokes interests held by former spouse’s relatives. Thus if after a divorce an individual wishes to continue to leave assets to a relative of the former spouse or name their former spouse’s relatives as a designee, it is necessary to execute new documents reaffirming that desire. While this may seem like an unlikely scenario, is important to remember how many people meet their spouse through a friendship with siblings, grow close to extended family during the course of a marriage, or feel that a former spouse’s sibling or parent is still a good trustee for minor children.

      Also related to updating estate plan documents, is the importance of updating beneficiary designations of assets that transfer outside of the probate process. This includes such assets as insurance policy proceeds and retirement benefits. Updating beneficiary designations are important because these beneficiary designations are a contractual agreement between parties, and divorce does not negate such designations. It is possible for a former spouse to receive large amounts of assets that the deceased certainly would rather have distributed to the beneficiaries of their newly updated estate plan.

      With all of the changes following the dissolution of the marriage, the updating of an estate plan can easily get lost in the shuffle. However due to the substantial impact that a divorce has upon an estate plan, it is important to take the time to review documents for necessary changes. When contemplating making changes be sure to consult an attorney to ensure that changes are made properly.

What You Need to Know about Wills

           The Will is an important but often-misunderstood document. People may tell you that a Will is what the "wealthy" use to give away their money when they die. What is less understood is that the Will is a valuable document for everyone.

           Before addressing why a Will is valuable, it is first important to understand what a Will actually does. A Will is a set of legally binding instructions followed after the death of the Testator ("Testator" is the legal term for the person executing the Will). The Personal Representative (sometimes called the "Executor") is the person the Will names with carrying out the Testator's instructions concerning the Estate ("Estate" is the legal term for a deceased persons assets and possessions). If a person dies without a Will (in the legal parlance, "Intestate") Michigan imposes a set of distribution instructions on that person's property based upon what the state legislature presumes people want. These instructions are sometimes often fail to take into account the unique circumstances of an individual's life.

           Even if you are not "wealthy", anyone with a residence, life insurance coverage, IRAs or retirement plans, bank accounts or other such assets needs a plan for distribution of those assets at death. The Will is the simplest form of that planning.. In a Will, a person can detail a simple or complex plan of distribution of assets for loved ones that is legally binding. The only limitation on your distribution plan is your imagination. While the Will does not avoid the probate process, it simplifies it. Not only can a Will reduce conflicts between a surviving spouse and other family members by providing clear instructions as to the Testator's desires, it also provides guidance and structure in a difficult and chaotic time. Additionally, leaving written instructions for the disposition of your assets is even more important if you are married with children, because the intestacy statute splits assets between your spouse and children, potentially creating financial hardship for the spouse.

           If you have minor children, a Will is the document used for nominating Guardians to care for children should something happen to you and your spouse. Without a Will, the Probate Court must decide between the assorted parties who petition the court to act as Guardians for your children. While your parents or siblings may feel responsible for taking care of family, they might not be your first choice to act as Guardians because they live in other parts of the country or their lifestyles are not compatible with yours or conducive to raising children. The Will allows you to designate guardians you feel are best for your children

           The necessity of Will increases when the Testator is married with or without children. Not only can a Will reduce conflicts between surviving spouses and other family members by providing clear instructions as to the Testator's desires. It also provides guidance and structure in a difficult and chaotic time. Additionally, leaving instructions as to the disposition of your assets is even more important if you are married with children because the intestacy statutes split assets between spouses and children, potentially creating financial hardship for the spouse.

           As your personal situation and asset situation becomes more complex, a Will can work in conjunction with a Trust to minimize the involvement of the Probate Courts in the distribution of the estate. Trusts, and their benefits will be discussed at a later date.

           Clearly, a Will does more than allow the rich to pass on their wealth. The Will allows everyone to decide what will happen to their assets after their death, provides peace of mind in a very trying time to for loved ones, and allows parents to decide who will raise their children should tragedy strike. A Will is only one piece of the estate planning process, but it is an excellent starting point. A well-drafted Will creates a good plan for distribution upon your death. It can also provide the basis for additional estate planning as a person's situation becomes more complex.