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Wills and Trust Planning
Beneficiary Designation
Many people believe that only a valid will transfers assets at their death. In reality, much of your estate may pass to your family by some form of will substitute. A will substitute transfers property without the necessity of probate court.
One common example of a will substitute is to own property with rights of survivorship. When property is owned by two or more persons, it can be owned in a few different ways. One way to own real estate is a life estate deed. A life estate deed allows the owner of the real estate to retain control for his or her lifetime, and at death the real estate transfers automatically to the named survivor without the necessity of probate court.
A life estate deed also allows you to retain the homeowner’s principal residence exemption or “homestead exemption” for property tax purposes on your principal residence during your lifetime. Michigan law requires the heirs of your estate to file a rescission of your homestead exemption with the assessor within 90 days of your date of death. The homestead exemption remains in effect until December 31st of the year of your death but will be removed for the following year. In order to qualify for the homestead exemption in the following year, the beneficiary of your property may then file for their own homestead exemption as long as they occupy the property as their principal residence.
The filing of the rescission of your homestead exemption will result in an increase in the real property taxes for the property. Failure to file the rescission may result in interest and penalties charged against your estate commencing the 91st day after the date of death, up to $200.
Property that passes by will substitutes includes all types of assets, such as stocks, bonds, and bank accounts. Parmenter O’Toole can help you with your estate plan using will substitutes to ensure that your assets transfer to your loved ones at your death.
* Nancy Ann Hornacek is an attorney with Parmenter O’Toole, PLC in Muskegon, Michigan. The comments in this article are not intended to be a substitute for legal guidance or advice for a specific situation. You should obtain informed legal counsel to assist in your decisions relating to any issues which may be raised in this article. For additional information regarding the above topic, Nancy can be reached at Nancy Ann Hornacek or 231.722.5406.