Michigan’s Top Ten Estate Planning Mistakes

Estate planning is a critical step for not only ensuring your assets are distributed according to your wishes, but also managed properly if you are incapacitated and unable to make decisions. However, many people put off estate planning or make estate planning mistakes which can lead to unintended consequences. The following are 10 common and preventable estate planning mistakes you should avoid.

Mistake #1. Assuming You Don’t Need an Estate Plan

A common misconception is that unless you are wealthy, you don’t need an estate plan. Another misconception is that unless you are old or seriously ill, you don’t need an estate plan. However, having an estate plan in place is important for everyone concerned about how and where their assets will end up after they die or if they are incapacitated. This includes all types of assets, including tangible personal property such as vehicles and personal possessions, money, and real estate. Without an estate plan, which typically includes a Will or a Trust, the probate court will distribute your assets based on Michigan law which may not be according to your intentions. An estate plan is a cost-effective way to ensure that a person of your choosing will distribute your property according to your intentions. An estate plan also includes documents to address incapacity during your lifetime so that your family members will know what life sustaining treatment and end of life care decisions to make on your behalf.

Mistake #2. Failing to Plan for Minor Children.

One of the most important decisions for parents with minor children is naming a guardian and conservator to care for them if both parents pass away or are incapacitated. Failing to name a guardian and conservator will result in the probate court making this decision, which may not be what the parents intended. Will the person appointed share your values and way of parenting? Naming a guardian and conservator in a Last Will and Testament for your minor children will ensure that your intentions are documented. Most importantly, discussing your decision with the person chosen will ensure they will accept this important responsibility. Consideration should also be given to naming an alternate or successor guardian and conservator in case your first choice is unable to serve for any reason. Another important part of an estate plan for minor children is creating a living trust that will manage the assets for the benefit of the children if the parents are deceased or incapacitated. A trust includes a parents’ distribution plan about how assets of the trust will be distributed to their children. For example, if parents have minor children and both become deceased, a Revocable Living Trust can instruct a successor trustee to manage the trust assets and to distribute all or portions of trust property when a child reaches a certain age or allow for distributions over time for specified purposes such as a child’s health care, education and support.

Mistake #3. Using On Line Forms and Templates for Estate Planning

It's crucial to understand the limitations and potential risks of using online forms and templates for your estate planning. The biggest problem with online estate planning is that it does not come with advice from an attorney who focuses on Michigan estate planning law to tell you what you need to do. A do-it-yourself approach can completely defeat the purpose of making an estate plan that fits your particular needs, especially if there may be issues of competency or potential misunderstandings about how and by whom property is to be distributed after death. In addition, online estate planning services do not analyze your personal and financial circumstances to create an estate plan to meet your needs and goals and an attorney most likely will not be involved in the process to ensure that the documents not only reflect your specific intentions but also comply with Michigan law. To do estate planning correctly, an experienced Michigan estate planning attorney should meet with you for a detailed discussion about a plan that will work for you and your family.

Mistake #4. Failing To Designate Beneficiaries on Your Accounts Properly.

Although using beneficiary designations on your bank and financial accounts, life insurance policies, and retirement accounts provides a simple and cost-effective method for the transfer of your assets at death, it also comes with some important considerations. For example, financial institutions typically do not distribute account assets directly to a minor child listed as a beneficiary so it may be necessary to establish a conservatorship for the child with the probate court, which can be expensive and time-consuming. Another consideration is that when an account holder forgets to change a deceased beneficiary on an account after the account holder’s death, the assets may pass to the deceased beneficiary’s estate, which may not be the intent of the account holder. To address this possibility, a contingent or successor beneficiary should be designated as a backup beneficiary to receive the assets in the event the primary beneficiary has predeceased the account holder. It is also important to remember that although beneficiary designations avoid probate administration, they also supersede anything in your will or living trust about how your assets are to be distributed. Consequently, it is important to coordinate your beneficiary designations with your will or living trust in order to avoid confusion and ensure that your intentions are clear.

Mistake #5. Forgetting To Update Your Current Estate Plan

Making an estate plan is never a “once-and-done” responsibility for you and your family. Throughout your life there will be many changes that should be addressed in your estate plan. Minor children who are now adults, marriage, divorce, the birth of a child, acquisition of property, such as a cottage or vacation home, will require changes to your estate plan. Keeping your estate plan current includes updating your estate planning documents as well as the beneficiaries you have listed on your financial and retirement accounts. Failing to update your plan could result in unintended distributions of assets from your accounts. In addition, it is important to remember that major family changes along with the passage of time may require changing the persons you have appointed to carry out your plan and make decisions on your behalf if you are incapacitated.

Mistake #6. Omitting a Durable Power of Attorney and Patient Advocate Designation from Your Estate Plan.

In Michigan, it is essential to have a Durable Power of Attorney for finances and a Patient Advocate Designation for health care. In these documents, you appoint a trusted person to make decisions on your behalf in the event you become incapacitated and unable to make financial and medical decisions. The Durable Power of Attorney can be effective immediately at the time of signing the document or can be made effective when the person becomes incapacitated. Most importantly, the Patient Advocate document allows a person to include written instructions for life sustaining treatment and end-of-life care decisions, which typically become significant if a person is in an irreversible coma with no reasonable likelihood of recovery. Most importantly, you should always confirm that the person you appoint as your Power of Attorney agent and your Patient Advocate is willing to take on the decision-making responsibilities for your finances and medical care if you are disabled.

Mistake #7. Not Having a Conversation with Your Family and Loved Ones About Medical Care in the Event You Have Lost Decision-Making Ability

Having a conversation with your family and loved ones about what medical care you do or do not want to receive if you have lost the ability to make decisions is a very caring and considerate thing you can do for your family and loved ones. Understanding your wishes ahead of time can make difficult health care decisions easier for your loved ones and provide them with the comfort they need to believe they are doing the right thing. These discussions are not only for people in their golden years but are for everyone given the potential, however slight it may be, for a serious illness or accident. Also, as a practical matter, you should always confirm that the person you appoint as your Patient Advocate is willing to take on the decision-making responsibilities for your care if you are disabled.

Mistake #8. Choosing a Personal Representative or Successor Trustee Who May Not Be Capable of Handling Their Duties.

It is crucial to appoint a trusted person as your personal representative or successor trustee who is capable of managing the affairs of your estate or trust assets. Questions to address include: Is the person able to effectively communicate with family members and beneficiaries? Is the person responsible and financially mature? Will the person be able to effectively carry out your wishes as outlined in your estate planning documents? Is there a person you can choose as a backup if your first choice is unavailable or unable to take on his or her responsibilities for any reason? Also, if there are family members or other trusted persons equally capable of handling the duties, you can always have a discussion with everyone for a consensus of choosing one as the primary fiduciary and the others as backups for efficiency’s sake.

Mistake #9. Failing To Fund A Trust.

A Revocable Living Trust offers flexibility and control over how assets are managed and distributed, both during your lifetime and after death. Creating a trust document is only the first step. Most importantly, a Trust must be “funded”. Failing to fund a trust means failing to transfer assets to the trust, which will allow the trust to hold title to the assets. This can be accomplished at the time the trust is created or upon the death of the person creating the Trust and can involve the transfer of real estate, bank accounts, and investment accounts into the trust. If there is a failure to fund the trust, the trust will be unable to fulfill its purpose.

Mistake #10. Assuming That Jointly Owned Property Will Be an Effective Estate Planning Tool.

While it can be helpful to have bank accounts and real estate to be owned jointly, if it is set up “with right of survivorship” language, it can be very problematic, especially for unmarried couples owning real estate. Holding property jointly with right of survivorship is virtually impossible to change in Michigan if a co-owner will not agree to a change of ownership or a sale of the property. Consequently, there is always the potential that this type of ownership can lead to disputes and conflicts ending in protracted court actions if relationships deteriorate or end. There is also less flexibility and control over the property because one joint tenant cannot prevent another from accessing the property or other benefits of ownership. Consulting with an attorney about this type of ownership is highly recommended.

Schedule a Free Consultation with an Estate Planning Attorney

At Ager Law Office, Bill Ager helps individuals and families with all aspects of estate planning, including Wills, Living Trusts, Durable Powers of Attorney for Property and Financial Matters, Patient Advocate Designations, and Enhanced Life Estate Deeds (Lady Bird deeds). From his Ann Arbor office, Bill Ager serves clients throughout Washtenaw County. To schedule a free consultation for an understanding of the cost of an estate plan specifically tailored to your needs, or for updating your existing plan, call (734) 649-0784, send an email to bill@agerlawoffice.com, or use the online contact form on this website.