Estate planning is one of the most powerful and important steps you can take to prepare for the future — and it’s crucial to make sure that no critical step gets overlooked, forgotten, or misplaced along the way.
Unfortunately, many people end up committing one or mistakes or mishaps during the estate planning process, which could jeopardize or invalidate their entire plan — and end up making things a lot more difficult for themselves and their loved ones in the future.
Working with an experienced and professional estate planning attorney is one way to make sure you dot every “i” and cross every “t,” so that you can move forward with confidence. Here are seven all-too-common Michigan estate planning mistakes to discuss with your lawyer:
1.) Starting Too Late
The only things that go away with time are snowflakes, youth, and opportunities. With estate planning, you have an opportunity to plan for yourself and your loved ones — and it’s important that you don’t let it pass!
A 2020 poll cited by CNBC suggests that about 62% of Americans say that they do not have a will. A 2020 report from Caring.com, meanwhile, indicates that less than one-third of all Americans (32%) have any estate planning documents in place. What’s more, Caring.com data suggests that the number of older and middle-age adults with estate planning documents actually fell by 20% and 25% between 2019 and 2020.
When we pass on, the assets we have acquired throughout our lifetimes will remain, and they will be reallocated. The question is: Will you have a say in the matter?
If you do not have an estate plan in place, you are giving up control. If you do not make a plan, the state of Michigan will create one for you. Michigan’s rules of intestate succession are very strict, which could result in your assets being distributed in ways that you would not have wanted. Meanwhile, failing to make a plan could cause the estate administration process to be significantly longer, more costly, and more contentious for your surviving loved ones.
2.) Forgetting to Plan for Probate and Estate Administration
Probate is often used as a catch-all term to refer to the legal process a decedent’s estate must succumb to in the courts. Here in Michigan, the ins and outs of the estate administration process can be complex, costly, and time-intensive — particularly if a will contest or similar issue arises after your passing.
Fortunately, there are many important steps you can take proactively, to help ensure that you have made probate as smooth and simple as possible for your loved ones. For instance, you can utilize a number of different mechanisms to transfer many of your most important and valuable assets outside of probate, including:
- Trusts. Trusts offer numerous estate planning advantages, including the capability to help many types of assets — such as investments and securities, tangible personal property, bank accounts, business interests, and real estate — bypass probate. The inter-vivos or revocable living trust is one of the most popular types of trusts in the United States, in part because it can help avoid probate and help families avoid court fees and stringent oversight. Learn more about using trusts as part of your estate plan here.
- Beneficiary Designations. Retirement accounts, life insurance policies, bank accounts, annuities, pension plans, investment accounts, and securities can be set up with a designated beneficiary, known as a “pay on death” or “transfer on death” beneficiary. When executed properly, this designation allows for the assets in an account or proceeds of a policy to transfer directly to the named beneficiaries upon the death of the account owner or policy holder, outside of probate.
- Jointly Owned Assets. Full ownership of real property owned through joint tenancy with rights of survivorship automatically transfers to the surviving co-owner upon the passing of the decedent, outside of the oversight of the probate courts. Property that is owned by married couples who share ownership as tenants by the entireties also transfers outside of probate. Joint tenancy designations can allow you to avoid probate without increasing your liability. Learn more about joint tenancy and tenancy by the entireties here.
Taking steps to help assets avoid probate can have numerous positive benefits for yourself, your estate, and your family and friends, including:
- Peace of mind knowing you minimized the stress of your circumstances for your family
- Assurance that your partner will the assets and control you want them to have
- Allowing for immediate distribution of your assets
- Maximizing the assets available to your beneficiaries when you have passed
- Minimizing or eliminating the cost of probate fees
An experienced legal professional can help you coordinate the use of probate and nonprobate transfers as part of your estate plan.
3.) Failing to Properly Fund Your Revocable Living Trust
Funding a trust is just as important as creating it in the first place. Too often, though, people overlook this important step!
Once you have set up your trust, it is very important to re-title your chosen assets into the trust, or this incredibly useful mechanism will remain an empty vessel. Remember that assets not properly titled into the name of your living trust will be subject to probate as part of your estate.
An expert in estate planning and trust law like our own Dean Patrick can not only assist you with the creation of the trust, but also ensure that all legal formalities are addressed so that your trust is completed to your specifications. In addition to selecting and re-titling the assets you want to place into your trust, this might also include naming a successor trustee to assume responsibility for managing and distributing trust assets when you are no longer able to do so.
4.) Not Planning Ahead for Incapacity
While it is never pleasant to think about, the reality is that no one is immune from suffering an accident or falling victim to an unexpected illness. An important part of estate planning that many people forget about is making plans for incapacity, including naming the person you want making decisions for you when you are unable to do so for yourself.
If you do not take precautions when you have the chance, your loved ones could be subject to the arduous and costly process of living probate.
Even if you do not have many high value assets, it is important to plan ahead for the possibility of incapacity; the experiences of 2020 are a painful reminder of that fact. One of the most important steps you can take to prepare for incapacity is to utilize durable powers of attorney.
A durable power of attorney is a legal document that gives someone of your choice (known as your agent, advocate, or attorney-in-fact) the right to handle your decisions if you become incapacitated. With a durable power of attorney, you don’t give up any control as long as you are capable. In Michigan, you can name a power of attorney for health care, a power of attorney for mental health, and a power of attorney for financial matters.
5.) Forgetting to Review or Update Your Plan Over Time
The only constant in life is change. For this reason, it is important to remember that creating an estate plan is not a one-time, “set it and forget it” process. Instead, it is crucial to regularly reevaluate and, if needed, update or revise your estate plan over time.
The reality is that no one knows for sure what’s in store for the future. Your named beneficiaries might predecease you; you could go through a divorce or estrangement that changes your personal relationships with your family members; you might move to a new state, acquire valuable new assets, or make new investments. Things outside of your control with estate planning implications might change over time, as well, such as state and federal tax laws.
Depending on your circumstances, there are many steps you can take to stay on top of things, including:
- Regularly reviewing your beneficiary designations
- Naming contingent beneficiaries
- Reviewing your will and trust paperwork and replacing documents, as needed
- Reviewing your powers of attorney
- Reviewing your guardianship, conservatorship nominations
A knowledgeable local attorney can make sure to keep things on track. A legal professional can help you to set a schedule to revisit your estate plan, while considering all the unique variables of your situation. When it’s necessary to make changes, an attorney’s shrewd guidance can help you to ensure that you update or replace your documents correctly, to make sure that things are as clear and direct as possible for your personal representative and trustee in the future.
6.) Failing to Plan for Minors or Beneficiaries WIth Disabilities
It is natural to want to make sure your loved ones are well cared-for when you are no longer around. But do you have a specific plan to make it happen? Estate planning is a powerful way to provide for the people who matter most to you. But it is important to be thorough and thoughtful, especially if you are planning ahead for minor children or adult beneficiaries who happen to be physically or mentally disabled.
One of the most important considerations when creating a will is nominating a guardian, who will become responsible for the care and custody of your minor children when you are no longer around. An attorney can help you consider your options and make the best selection for your circumstances.
Meanwhile, you can utilize your estate plan to help make sure your loved ones receive crucial assets and funds — while making sure that inheritance is not detrimental to your beneficiaries down the line. For instance, you can utilize trust provisions to help ensure that funds meant for your minor children are not squandered by a guardian, or that children are not able to access funds until a certain date. Similarly, a trust can help you provide for your loved ones with special needs, particularly if they are receiving government benefits that might be affected by receiving an inheritance. You can also include spendthrift provisions, to help prevent beneficiaries from wasting their trust assets from excessive spending.
7.) Not Working With an Experienced Professional
As we often say: When you have a foot problem, you go to the podiatrist. When you have a heart problem, you go to the cardiologist. When you are forced into the probate court or want to create a comprehensive estate plan that will take care of your assets and provide for your loved ones, you need to go to an established probate and estate planning attorney.
An attorney is uniquely qualified and capable to help you consider your specialized circumstances, and create the estate plan that will best suit your goals. A knowledgeable legal professional can help you understand how all of the important pieces of an estate plan may work together, while also getting a handle on the financial and tax implications of estate planning and inheritance, and how they might apply in your situation. As you create estate planning documents, an attorney can help ensure that the language is clear and concise, and that every formality is executed fully and properly — so that you can get some well-deserved peace of mind.
Have Any More Questions About Michigan Estate Planning?
At the Law Office of Dean E. Patrick, our goal is to provide you with only the best professional legal services available in Michigan. Work with us and you have our sincere promise to carefully plan and manage each and every step of your legal matter from start to finish.
When it is time to take care of your estate planning needs, get the answers, insight, and guidance you and your beneficiaries deserve. Whether you are trying to avoid probate with a trust, want to make sure your assets are protected and transferred according to your wishes, or want to plan for incapacity with powers of attorney, we can custom tailor a solution to suit your needs.
Mr. Patrick is a licensed Michigan lawyer specializing in estates and probate law. He has helped hundreds with their estate planning needs, giving him the necessary knowledge to provide unparalleled legal advice and assistance that can make your life a little easier.
If you have questions or are curious about how to move forward, contact our offices at (833) 469-4897 or reach out online to set up your initial consultation.
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