Planning an estate in Michigan involves several of the key aspects of estate planning used in several other States. However, Michigan has its own estate relevant tax laws, probate procedures, and trust regulations that may affect the managing of, value and cost of the estate. Estate management can be divided into to categories 1) financial and 2) legal.
Since end of life constitutes legal settling of assets, identity, debts and taxes in addition to family related matters of end of life management, decision making etc. the estate management process has the potential to become complex, but doesn't always have to be.
This article will outline some of the basic aspects of estate management and planning in the State of Michigan, specifically probate, and taxes and then provide additional tips that may assist in the Michigan estate planning process.
Michigan estate probate law
Michigan's estate law can be read at the Michigan State Legislature website, the link for which is provided with this article and in this section. Some key points regarding probate outlined by the Michigan Estate Law are provided below. Please note, the probate process is not the only way to transfer an estate, as trusts may also be used and may limit public record of the deceased's Will and/or estate details.
• Probate proceedings must take place in county of next of kin's residence unless out of State, in which case County of estate holder's property subject to Court transfer. (Act 386, Section 700.3201)
• Informal application for probate can be filed with the probate court if no formal application has be filed within 28 days following death of estate holder (Act 386, Section 700.3301)
http://www.legislature.mi.gov/(S(i04vr0azntmhxaebq0y1in55))/mileg.aspx?page=getObject&objectName=mcl-Act-386-of-1998
Michigan estate and related taxes
In Michigan no inheritance tax currently exists and estate tax is variable along with the Federal Estate Tax that will be 0% for 2010 and $1 million thereafter excluding adjustments to the law. The maximum State income tax in Michigan is 4.35% and tangible personal property is taxed with real estate exemptions locally and not by the State. (retirementliving.com)
http://www.retirementliving.com/RLstate2.html#MICHIGAN
Holding assets in a Michigan estate may be worth taking a second look at due to the fact 1) tangible property is taxed heavily at the local level and 2) no Standard or Federal deduction exists for taxable income. Even though no inheritance tax is currently in place within Michigan, the potential tax levied on income and property can be quite high.
At the local level property tax can be as high as 50% with some exemptions regarding real estate according to retirementliving.com. Since the real estate exemption is quite high, it may be advantageous to transfer property to make use of this exemption and reduce property tax. A property tax calculator from the Michigan Department of the Treasury is provided below.
https://treas-secure.state.mi.us/ptestimator/ptestimator.asp
If Michigan estate property qualifies for the Michigan Principal Residence Exemption (PRE), total property tax of assets within the estate, be it inherited or otherwise, may be significantly reduced. Instructions on how to apply, qualify and obtain PRE are linked to below. This tax is quite relevant to the estate as property that does not become the principal residence of the estate beneficiaries may not qualify for the PRE exemption.
http://ww.michigan.gov/documents/2856_11014_7.pdf
Michigan estate tips
There are many aspects to estate planning in Michigan that should ideally be considered in the process. Since individual circumstances can differ considerably, no one estate planning method may be of best fit to the majority of Michigan estate planners. However, that said, several aspects of estate planning generally do stay the same in many cases including 1) estate tax strategy, 2) estate administration and 3) estate value and cost. The tips below are just a few of the actions, to be used with the reader's discretion and judgment, that may be helpful in estate planning in Michigan.
• File a principal residence affidavit to qualify for principal residence exemption
• Contemplate different asset ownership options ex: joint tenancy
• Read of the State probate laws and other relevant laws linked to in this article
• Keep track of changes to the Federal estate law as Michigan estate law is related to it
• Limit annual taxable estate derived income received after transfer
• If real estate does not qualify for exemption, consider non-taxable asset reallocation
• Contact and discuss estate planning with a local financial advisor or attorney
• Develop a short, medium and long-term estate plan, or whichever is appropriate
• Allow for estate flexibility in terms of asset transfer, ownership and management
Since end of life constitutes legal settling of assets, identity, debts and taxes in addition to family related matters of end of life management, decision making etc. the estate management process has the potential to become complex, but doesn't always have to be.
This article will outline some of the basic aspects of estate management and planning in the State of Michigan, specifically probate, and taxes and then provide additional tips that may assist in the Michigan estate planning process.
Michigan estate probate law
Michigan's estate law can be read at the Michigan State Legislature website, the link for which is provided with this article and in this section. Some key points regarding probate outlined by the Michigan Estate Law are provided below. Please note, the probate process is not the only way to transfer an estate, as trusts may also be used and may limit public record of the deceased's Will and/or estate details.
• Probate proceedings must take place in county of next of kin's residence unless out of State, in which case County of estate holder's property subject to Court transfer. (Act 386, Section 700.3201)
• Informal application for probate can be filed with the probate court if no formal application has be filed within 28 days following death of estate holder (Act 386, Section 700.3301)
http://www.legislature.mi.gov/(S(i04vr0azntmhxaebq0y1in55))/mileg.aspx?page=getObject&objectName=mcl-Act-386-of-1998
Michigan estate and related taxes
In Michigan no inheritance tax currently exists and estate tax is variable along with the Federal Estate Tax that will be 0% for 2010 and $1 million thereafter excluding adjustments to the law. The maximum State income tax in Michigan is 4.35% and tangible personal property is taxed with real estate exemptions locally and not by the State. (retirementliving.com)
http://www.retirementliving.com/RLstate2.html#MICHIGAN
Holding assets in a Michigan estate may be worth taking a second look at due to the fact 1) tangible property is taxed heavily at the local level and 2) no Standard or Federal deduction exists for taxable income. Even though no inheritance tax is currently in place within Michigan, the potential tax levied on income and property can be quite high.
At the local level property tax can be as high as 50% with some exemptions regarding real estate according to retirementliving.com. Since the real estate exemption is quite high, it may be advantageous to transfer property to make use of this exemption and reduce property tax. A property tax calculator from the Michigan Department of the Treasury is provided below.
https://treas-secure.state.mi.us/ptestimator/ptestimator.asp
If Michigan estate property qualifies for the Michigan Principal Residence Exemption (PRE), total property tax of assets within the estate, be it inherited or otherwise, may be significantly reduced. Instructions on how to apply, qualify and obtain PRE are linked to below. This tax is quite relevant to the estate as property that does not become the principal residence of the estate beneficiaries may not qualify for the PRE exemption.
http://ww.michigan.gov/documents/2856_11014_7.pdf
Michigan estate tips
There are many aspects to estate planning in Michigan that should ideally be considered in the process. Since individual circumstances can differ considerably, no one estate planning method may be of best fit to the majority of Michigan estate planners. However, that said, several aspects of estate planning generally do stay the same in many cases including 1) estate tax strategy, 2) estate administration and 3) estate value and cost. The tips below are just a few of the actions, to be used with the reader's discretion and judgment, that may be helpful in estate planning in Michigan.
• File a principal residence affidavit to qualify for principal residence exemption
• Contemplate different asset ownership options ex: joint tenancy
• Read of the State probate laws and other relevant laws linked to in this article
• Keep track of changes to the Federal estate law as Michigan estate law is related to it
• Limit annual taxable estate derived income received after transfer
• If real estate does not qualify for exemption, consider non-taxable asset reallocation
• Contact and discuss estate planning with a local financial advisor or attorney
• Develop a short, medium and long-term estate plan, or whichever is appropriate
• Allow for estate flexibility in terms of asset transfer, ownership and management
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