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The Top 10 Disastrous Planning Mistakes Michiganders Make That Put Their Families At Risk...
1. They Have No Written Plan
Everyone has an Estate Plan, whether you know it or not. There are default rules in place for those who don’t take the time to make their own written plan. Without a written plan of your choosing, your kids and family are at the mercy of the government and the courts about such critical decisions as:
– Who will raise your children
– Who will inherit your money & property
– When your children will inherit your money & property
– Who will manage your money & property
– Who will make medical decisions if you are incapacitated
– Whether you will be kept artificially on life support even if there’s no chance of your recovery from a vegetative state.
2. They Have An Out-of-Date Plan
Will, Trusts, & Estate Plans should be reviewed at least every 3 years or sooner if you have a major life occurrence in the family (i.e. death, birth, marriage, divorce, critical illness, etc.).
Your life changes and your plan needs to change with you. There are four things your Will & Trust attorney will never know:
– When you’ll die
– What you’ll own when you die
– What your family dynamics will be when you die
– What the law will be when you die
Although your plan should be flexible to accommodate different scenarios, your plan needs to change over time as your circumstances change.
3. They Think A Will or Trust Is Enough
An Estate Plan is more than just the documents themselves. Your Estate Plan is more like a puzzle, made up of State & Federal law, who your family members are, what you own, the titling on your assets, the beneficiary designations on your assets, and the documents themselves.
A Will or Trust doesn’t do a bit of good if they aren’t part of your comprehensive planning on how everything fits together to accomplish your desires and goals for your family.
Think of your Estate Planning documents as the screws that hold your plan together after you’ve coordinated the law, the titling of your assets, your beneficiary designations, etc.
4. They Use a Do-it-Yourself Plan
Do-It-Yourself documents are all available to purchase at your local office supply store or online.
However, these are fill-in-the-blank, cookie-cutter forms that oftentimes won’t fit the unique needs of your family’s situation.
In addition, many of these forms won’t be worth the paper they are printed on unless they are a part of the comprehensive plan that works for your family.
We’ve seen many documents that turn out to be irrelevant because they don’t fit together with the rest of your plan or they missed critical components or supplements.
We once represented a client whose brother had downloaded a pre-fab “Will” form off of the internet.
Unfortunately, the “Will” had not been reviewed by an attorney and wasn’t considered legally valid.
It’s surprisingly easy to mess up!
The client had to spend 3 and a half years (and tens of thousands of dollars) fighting off legal challenges and trying to prove his brother’s intentions to the court.
As part of the probate process we were forced to declare his assets to the court.
When creditors and estranged relatives saw the size of the estate, they began filing claims.
Even worse, the brother had never updated his life insurance.
His ex-wife (whom he had not spoken to in years) received a multi-million dollar payday.
What was left of the estate was gobbled up by filing costs, legal bills, and “inventory fees” (a fancy word for taxes).
Almost nothing was left for the man’s beneficiaries – a sadly common scenario.
5. They Haven’t Named A Guardian For Minor Children
If you don’t nominate a guardian to raise your children if something happens to you and/or your spouse, then a judge will make these critical decisions for your family.
Things you need to consider:
– Naming sufficient alternates
– Being specific on who you want to serve and under what circumstances
– Whether to name the caretaker guardian as the financial guardian
– Specifically excluding those you know you wouldn’t want to serve as guardian
If you’re leaving property to someone who has ‘special needs,’ you’ll also want to build in specific trust language for that person so that their inheritance won’t jeopardize any public assistance benefits they are or might become entitled to.
6. They Don’t Update Their Plan After A Divorce
It’s critical that if you are divorced or are going through a divorce that you update your Will, Trust, or Estate Plan and beneficiary designations – immediately.
Your divorce decree does not override your Estate Plan and beneficiary designations.
7. They Don’t Consider Special Planning Considerations In A “Blended Marriage”
Family communication is crucial to help alleviate confusion and hard feelings between blended family members.
If you come into the marriage with any assets of your own, seriously consider pre or postnuptial agreement.
A surviving spouse has rights to your estate & separate property after you die unless they waive them.
It’s also extremely easy to accidentally disinherit your children in a second marriage situation.
Make sure your children by prior marriage are protected and their inheritance is protected if you die first.
8. They Fail To Recognize That One Spouse Is Clueless When It Comes To Family Finances
It is typical for one spouse to take the lead on the family’s finances and record keeping.
However, it’s important to keep your family’s financial records organized so if the “knowledgeable” spouse dies, the other spouse is not left floundering.
9. They Fail To Leave Detailed Instructions For Health Care And End-of-Life Decisions
It puts an amazing amount of stress on family members to have to make health care and end-of-life decisions for you.
Family members can fight among themselves if you’ve neglected to leave clear instructions for your preferences at the end of life (i.e. pain relief even if it will hasten your death, resuscitation, burial vs. cremation, organ donation).
10. They Fail To Plan For Disability
It’s critical to include a Durable Power of Attorney for Finance, Living Will, Medical Power of Attorney/Designation of Patient Advocate, Organ Donation, & HIPAA Authorizations in your plans.
To illustrate this point, here is a story about a couple we once represented, let’s call them John and Mary.
John and his wife Mary planned carefully, and saved and invested wisely for their retirement over the years.
They had drawn up two “internet” Wills, which left everything to each other, and were always up to date.
Unfortunately, John developed Alzheimer’s.
As his condition worsened, Mary needed to sell some of their investments.
But John was no longer able to conduct business, and Mary soon learned she couldn’t sign for him – only a court appointed guardian or “attorney-in-fact” could.
It was hard enough dealing with John’s situation, but now Mary also had to deal with the court.
She didn’t know the court would stay involved to “protect” John’s share of the proceeds.
She had to keep detailed records of everything – the court insisted upon approving all expenses and the sale of assets.
There is a high likelihood that a person will become disabled before they die.
Court mandated guardianships are expensive, stressful, and time consuming.
Oftentimes, with proper planning and forethought, guardianships can be avoided altogether with a well-thought Estate Plan.
It will be incredibly difficult for your family when you're gone…
After all, they always relied on you when you were here.
No question, there will be sadness, confusion, and a large void to fill in your absence.
But there is a way you can continue to be that foundation in their lives after you’re gone...
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Written By Chris Atallah - Founder, Rochester Law Center, PLLC
Written By Chris Atallah - Founder, Rochester Law Center, PLLC
Chris Atallah is a licensed Michigan Attorney and the author of “The Ultimate Guide to Wills & Trusts – Estate Planning for Michigan Families”. Over that past decade, Chris has helped 1,000s of Michigan families and businesses secure their futures in all matters of Wills, Trusts, and Estate Planning. He has taught dozens of seminars across the State of Michigan on such topics as avoiding the death tax, protecting minor children after the parents’ death, and preserving family wealth from the courts and accidental disinheritance. If you have any questions, Chris would be happy to answer them for you – just call at 248-613-0007.