Here in Michigan and across the country, there is an all-too-common belief that estate planning is only something to think about when you’re elderly. By the same token, many people also believe that estate planning is only something that the extremely wealthy will ever have to consider.
In fact, estate planning is a crucial way to protect your loved ones and prepare for the future at any age — and it’s particularly important for young families. In recent months, our ongoing situation with COVID-19 has served as a sobering reminder of this fact.
The Importance of Estate Planning for Young Families
No matter what stage of life’s journey you’re on, estate planning is a way to assure that you can keep control, even when you are unable to speak on your own behalf.
Estate planning involves making vital decisions about who will receive your assets and property, how your loved ones will be cared for, and who will make healthcare and financial decisions on your behalf should you ever be unable to do so for yourself. Creating a comprehensive estate plan is a way to minimize the risk for arguments and conflicts among your family, while also maximizing the assets available to your beneficiaries and streamlining the expensive and time-consuming probate process.
There are many different mechanisms that can be used as part of an estate plan here in Michigan, including wills, trusts, and powers of attorney. The instruments that should be used will depend on the specifics of your circumstances.
With all this being said, it can often be difficult to face all of the personal and financial matters that are tied up in estate planning — and many young adults settle by kicking the can down the road.
In fact, a 2020 study from Caring.com found that just 16.4% of adults under 34 have one or more estate planning documents in place. Similarly, less than a third of adults aged 35-54 (27.2%) have any kind of estate planning documents. Just 45% of people who make $80,000 or more say that they have any estate planning documents prepared.
The most common reason for not having an estate plan in place? About 36% of survey respondents said that they simply “haven’t gotten around to it.”
The only things that go away with time are snowflakes, youth, and opportunities. You have an opportunity to plan for yourself and your loved ones. Don’t let it pass.
What Goes Into an Estate Plan?
Estate planning is beneficial for single, married, and cohabiting individuals, and there’s never a “wrong” time to get started. For young adults, however, it can often be daunting to think about the future — let alone the sensitive topics that go into estate planning, including aging, money, and the unique dynamics of your family.
At the same time, there are a lot of complicated terms and concepts involved in estate planning, which can be intimidating to face alone. An experienced estates and probate attorney can be an invaluable partner as you move forward with this important process — helping you get answers to your questions about estate planning tools or techniques, while also providing peace of mind knowing that you are taking action while you can.
Here are three important questions to ask as you begin to consider estate planning with your attorney:
Who Will Make Decisions On Your Behalf If You Become Incapacitated?
Who will be there to speak up on your behalf if you experience a serious illness or an accident that renders you incapacitated and unable to make or communicate decisions for yourself?
This is not always pleasant to think about. After all, nobody expects to get in an accident, sustain an injury, or fall gravely ill. Nevertheless, it’s important to be prepared in case you do. One of the most important estate planning tools in such situations is the durable power of attorney.
Broadly speaking, a power of attorney is a writing that gives legal authority to a third party (known as the agent, advocate, or attorney in fact) to act on the behalf of someone else (known as the principal). The agent’s powers can be quite broad, or fairly limited. In estate planning, powers of attorney are primarily used to ensure that someone you trust manages your financial and health care decisions when you no longer can.
These responsibilities are controlled by different mechanisms. A durable power of attorney for health care gives someone of your choice the right to handle medical decisions if you become incapacitated. A durable power of attorney for financial matters gives your chosen agent the right to handle designated financial decisions and responsibilities on your behalf.
When executed properly, a durable power of attorney offers numerous advantages. Above all, it helps assure that someone you trust is appointed to handle your financial affairs, rather than a court appointed conservator or guardian. This helps make things easier for your loved ones, keeps you in control, and protects your family’s privacy.
If you don’t make plans in advance? Without a durable power of attorney in place, your loved ones could be subjected to the difficult process of living probate. In such cases, a guardian and/or conservator will have to be appointed by the court. This may not be the person you would have chosen for yourself.
While it’s never fun to think about what would happen if you were to sustain a major injury or succumb to an illness, it is necessary to ensure your affairs are handled the way you would want. A knowledgeable attorney can guide you through the process of putting protections in place and choosing a trusted agent to help in your moment of need.
How Will You Provide for the People Who Matter Most to You?
We all accumulate property and assets over the course of a lifetime. Often, this occurs during moments of major transition that tend to happen in your 20s and 30s — such as getting married, starting a family, buying a home, or getting serious about your investment and savings accounts.
No matter how old or wealthy you are, estate planning gives you a say in how your most important assets will be reallocated. Estate planning empowers you to assure the distribution of your assets in a manner appropriate for your circumstances, while taking steps to ensure that inheritance does not become a detriment to your beneficiaries.
Without proper planning, you open the door to family conflicts and disagreements. Even worse, you could cede control over what happens to your most important assets to Michigan’s strict laws of intestate succession. Ultimately, this could result in your assets being distributed in ways that you would not have wanted.
For example, some or all of your estate could end up in the hands of an estranged parent, or a brother or sister with whom you did not have a good relationship. If you do not take control when you have the chance, these important decisions will be out of your hands — and the people who do matter most to you may be left out in the cold.
Fortunately, there are many tools and mechanisms that can be used to keep you in control, including:
A will is a valuable estate planning tool, which allows you to plan for the distribution of your estate and nominate someone you trust to handle your affairs in the probate court. If you do not take advantage of your ability to determine how your properties and assets will be handled in the event of your passing, the state will decide for you. A Michigan probate lawyer can walk you through the process of creating a last will that will protect your family and help to avoid or minimize the potential for contests.
Broadly speaking, a trust is a written agreement created by a settlor or grantor that names an individual (known as the trustee) who is responsible for managing property as directed by the trust agreement. From an estate planning perspective, trusts can be used to direct the distribution of your property, help protect your estate from certain taxes and fees, and minimize the potential for lengthy probate issues. You should not hesitate to contact a professional and shrewd trusts attorney, who can help you to assess your estate, understand the potential benefits or drawbacks of establishing a trust, and ensure that all legal formalities are addressed so that your trust is to your specifications.
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.
Estate planning is important in that it allows you to expect the unexpected, and keep step with any changes that life throws your way over time.
For instance, remember that your estate plan can and should be updated as your personal and financial circumstances change. In addition to considering the distribution of your property, for instance, it may also be important to reevaluate who you intend to name as your estate’s personal representative — that is, the person tasked with managing your estate and guiding it through the probate courts.
In addition, you may wish to update who you name as the trustee or as beneficiaries of your trust; or update your beneficiary designations as your relationships change. For example, you might have named your parents or a sibling as the beneficiary to a financial account when you were younger, but now want that asset to be transferred to a partner.
What Will Happen to Your Children?
In addition to maintaining control over your assets, estate planning is also about providing for the care and security of your loved ones in the years to come.
For young families with children, for example, estate planning is one way to assure that your children will have a guardian of your choosing if you are unable to raise them. You can use a will to nominate a guardian to handle the care, custody, and control of your minor children, so that you can get some peace of mind that they will grow up the way you intended.
Similarly, you can use various estate planning mechanisms to protect the finances of your minor children or incapacitated adult loved ones. You can use a will to nominate a conservator to handle the financial affairs of your minor or incapacitated adult loved ones if you pass away when they are still unable to manage their own finances, for instance. You can also create provisions in a trust to provide for the continued financial security of an incapacitated adult, or to protect your children’s inheritance until they reach a certain age.
Nominating a guardian or conservator can be a difficult decision. An empathetic and knowledgeable attorney can help you consider all of the variables of your unique situation, and understand how to make the best choices for your family’s circumstances.
Want to Discuss Any Element of Michigan Estate Planning and Probate?
There is no reason to put off taking care of those you love and that which you have worked hard for.
Looking for guidance on the many moving pieces that go into successful estate and incapacity planning, including wills, trusts, powers of attorney, guardianship, and conservatorship? Your Michigan probate attorney Dean E. Patrick is here to help.
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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