Protecting Your Assets in Michigan: Estate Planning Essentials

In Michigan, the essential estate planning documents include: 1) A Last Will and Testament that directs how your assets should be distributed; 2) A Durable Power of Attorney for financial matters that allows someone to manage your finances if you're incapacitated; 3) A Healthcare Power of Attorney (Patient Advocate Designation) that appoints someone to make medical decisions for you; and 4) A Living Will or Advance Directive that outlines your end-of-life care preferences. For comprehensive asset protection, you might also consider establishing a trust.

If you die without a will in Michigan (known as dying 'intestate'), your assets will be distributed according to Michigan's intestate succession laws. Generally, your assets would go to your closest relatives in a specific order: first to your spouse and children (with specific divisions depending on how many children you have), then to parents, siblings, and more distant relatives. The court will appoint a personal representative to manage this process, which can be time-consuming and may not align with your wishes. Creating a will gives you control over asset distribution and can save your loved ones significant stress and expense.

To protect your home in Michigan if you need long-term care, consider: 1) Creating an irrevocable trust and transferring your home into it at least five years before needing Medicaid (to avoid the five-year 'look-back' period); 2) Establishing a life estate, where you retain the right to live in your home while transferring ownership to beneficiaries; 3) Purchasing long-term care insurance that can cover care costs without depleting your assets; or 4) Exploring Michigan's Estate Recovery Exemptions, as certain circumstances may protect your home from Medicaid estate recovery. Consult with an elder law attorney to determine the best strategy for your situation.

A Lady Bird Deed (enhanced life estate deed) is a useful asset protection tool in Michigan that allows you to transfer property to beneficiaries upon your death while maintaining complete control during your lifetime. The key benefits include: 1) Avoiding probate for the property; 2) Maintaining eligibility for property tax exemptions during your lifetime; 3) Protecting against Medicaid estate recovery in Michigan; and 4) Retaining the right to sell, mortgage, or change beneficiaries without their consent. Unlike traditional life estates, you don't need permission from remainder beneficiaries to sell or mortgage the property. This deed can be particularly valuable for protecting your primary residence while maintaining control.

Michigan offers several ways to protect assets from creditors: 1) Homestead exemption protects up to $40,475 of home equity ($60,725 for those 65 or disabled); 2) Retirement accounts like 401(k)s and IRAs generally have strong protection; 3) Life insurance policies and annuities have specific protections under Michigan law; 4) Tenancy by the entirety ownership between spouses can shield property from creditors of just one spouse; 5) Michigan-specific asset protection trusts can shield assets while allowing some benefit retention; and 6) Limited Liability Companies (LLCs) can protect personal assets from business liabilities. The timing of transfers is critical—transfers made to avoid existing creditors may be challenged as fraudulent conveyances.

The Michigan Principal Residence Exemption (PRE), formerly called the Homestead Exemption, doesn't directly protect assets from creditors but provides significant property tax savings that help preserve your wealth. If your Michigan home is your primary residence, you can exempt up to 100% of your home from school operating taxes, potentially saving thousands annually. To qualify, you must own and occupy the property as your primary residence and file a Property Transfer Affidavit and PRE Affidavit with your local assessor. This exemption remains in place until you no longer use the property as your principal residence, making it an important part of your overall asset protection strategy.

Michigan has adopted the Fiduciary Access to Digital Assets Act, which helps protect and manage digital assets. To protect these assets: 1) Create an inventory of all digital assets including online accounts, cryptocurrencies, and digital files; 2) Use online tools provided by digital platforms to designate a legacy contact; 3) Include specific provisions in your will or trust authorizing your personal representative to access digital accounts; 4) Consider a password manager and share access information with trusted individuals; and 5) Back up important digital assets to physical storage. Without proper planning, your digital assets may be lost or inaccessible to your heirs, potentially losing both sentimental and financial value.

Michigan's Medicaid 5-year look-back period means that when you apply for Medicaid long-term care benefits, the state reviews all financial transactions made during the previous five years. Any assets transferred for less than fair market value (gifts or transfers to trusts) during this period may trigger a penalty period of ineligibility. To protect assets: 1) Plan early—ideally more than five years before needing care; 2) Consider exempt transfers to certain family members like disabled children or caretaker children; 3) Convert countable assets to exempt assets like your primary residence (up to certain equity limits), one vehicle, or prepaid funeral arrangements; and 4) Explore legal strategies like specific trusts designed to protect assets while maintaining Medicaid eligibility.

A revocable living trust in Michigan doesn't directly protect assets from creditors but offers other important protections: 1) Probate avoidance—assets in the trust pass directly to beneficiaries without court proceedings; 2) Privacy—unlike wills, trusts aren't public record; 3) Incapacity planning—a successor trustee can manage trust assets if you become incapacitated; and 4) Potential tax benefits depending on your situation. While you maintain complete control of trust assets during your lifetime, this also means creditors can still reach these assets. For creditor protection, consider complementary strategies like irrevocable trusts, proper insurance coverage, or business entities. A revocable trust is primarily for efficient asset transfer rather than asset protection.