Leaving Your Estate to Friends Over Family
Most common estate plans leave the decedent's property to family members. The decedent's intent is often quite clear: leave everything to the kids.
This post examines situations where the decedent designates friends or non-family members as heirs. There are some special considerations when this is the goal.
Friends are not "Heirs at Law"
In order to leave your estate to someone other than your family, you need to make your wishes known in writing. Some assets, such as life insurance, bank accounts, or retirement account, can be passed on by designating a beneficiary. Simply name the friend who is intended to receive the asset and that person will be notified of their ownership rights upon the original asset owner's death.
The plan administrator, the bank or the insurance company will have specific forms for the owner to complete; these forms include the designation of a beneficiary. Be advised, however, that the owner must take affirmative action to properly name a designated beneficiary.
Objects of Their Bounty
In probate law, the term "objects of their bounty" refers to individuals or entities who are named as beneficiaries in a person's will. These beneficiaries are referred to as objects of the decedent's bounty because they are the intended recipients of the decedent's assets and property after their death.
The term "bounty" refers to the generosity or largesse of the decedent in leaving property or assets to their beneficiaries. By naming someone as an object of their bounty, the decedent is indicating that they wish for that person to receive a certain portion of their estate or property upon their death.
In general, the term "objects of their bounty" is used to distinguish beneficiaries who are named in a will from other potential heirs who may be entitled to receive a share of the decedent's estate under the laws of intestacy if no will exists. By naming specific individuals or entities as objects of their bounty in a will, the decedent is able to control the distribution of their assets and property in accordance with their wishes.
Doing Nothing Results in Intestacy
When someone dies without a will or a trust, that person dies "intestate". In Michigan, that results in the laws of intestate succession making all of the decisions about who gets the decedent's property.
Most folks agree that intestate succession is something to be avoided; this is why estate plans are prepared and executed. Nevertheless, if a person dies intestate in Michigan here is what that law says about where that person's property goes:
If you are survived by a spouse but no children or parents, your spouse inherits 100% of your estate.
If you are survived by a spouse and children, your spouse inherits the first $150,000 of your estate plus 1/2 of the remaining balance, and your children inherit the other 1/2 of the remaining balance divided equally among them.
If you are survived by children but no spouse, your children inherit your entire estate divided equally among them.
If you are survived by parents but no spouse or children, your parents inherit your entire estate divided equally between them.
If you are survived by siblings but no spouse, children, or parents, your siblings inherit your entire estate divided equally among them.
If you are survived by grandparents but no closer relatives, your grandparents inherit your entire estate divided equally between them.
If none of the above circumstances apply, then the law provides a more detailed hierarchy of relatives who could inherit, with the goal of finding the closest living relative(s). In the end, however, if there are no family members, the estate assets will "escheat" to the State of Michigan.
One of the most notable cases of intestate succession where a decedent's estate worth millions of dollars escheated to the State of New York. Here is a link to my blog post detailing that interesting case.
Older, Single, No Children
Over the past several years, we have advised many older clients that have been single their entire lives and have no children or spouse to bequeath property. Oftentimes, such individuals wish to leave their estate to trusted friends, or to a favorite charity.
Such bequests require a written estate plan. Michigan, as all other estates, make no provisions for non-relatives. If there is no written estate plan, the State of Michigan stands to inherit the decedent's property.
In some of these situations, the elderly person has often inherited property from parents or other family members and their estate can be significant.
Friends with Benefits
If a client does have family, but their intent is to bequeath their property to a friend, we recommend that the estate plan expressly address the disinherited family member. This practice verifies the decedent's intent in writing and clears up any question about who gets what.
In drafting an estate plan naming your friends, there are other designations for which friends can be useful. For example, in the case of someone who is older, unmarried and without children, a trusted friend can fill the role of a fiduciary.
Our law firm's estate plans routinely contain powers of attorney -both financial and medical- as well as advanced directives for health care issues. A typical estate plan also contains a will, a trust, or both.
In these documents, the client names a trusted friend to serve in the role of power of attorney, trustee, and personal representative. This person acquires much power relative to the client, but also has important legal duties to that client.
One consideration when naming a friend as one of your fiduciaries is the amount of work it could take to administer your estate or trust. If you have a complex estate, your friend may suggest that you "not do her any special favors".
We Can Help
If you are thinking of naming a friend as a beneficiary, a fiduciary, or both, contact our law firm. We can review your options and ensure that your estate plan does what you intend it to do.