Thursday, October 4, 2012

Common Mistakes in Estate Planning

           As attorneys, we see many errors that people make regarding their estate planning, which can be very costly. Some examples to consider and watch for are:
  1. Not having a plan. “If you fail to plan, you plan to fail”. Whether you have a large estate or a small estate, planning is important to insure you transfer your assets to your loved ones with a minimum of delay and cost. Failing to plan results in state statutes determining where your assets go at your death and it may be quite different from your actual wishes.
  2. Leaving assets outright to spouse or children. Leaving assets outright to a spouse or children, especially minor children, may subject them to expensive probate proceedings, garnishment by creditors, foolish spending by immature beneficiaries, or make them reachable by a divorcing spouse of a child. There are better ways to protect your loved ones.
  3. Failure to update your estate plan as your life circumstances change. Your life is constantly changing—new children, growing children, new house, increasing investments, elderly loved ones relying on you—and it is important that your estate plan change with life changes to be effective.
  4. Failure to name a guardian and successor guardian for minor children. If you do not name people to care for your children, you open the door for a judge to select someone, and that person may not have been the person you feel would be best to care for your minor children.
  5. Failure to prepare for incapacity as well as death. Statistically, it is more likely that you will become incapacitated than die at any particular time in your life. Having documents in place insures easy administration without having to go to the Probate Court to have someone appointed to take care of you.
  6. Failure to retitle assets to conform to your estate plan. Preparing estate plan documents is only part of the planning process. It is necessary to retitle assets and designate beneficiaries for retirement and life insurance policies to assure quick, easy, and private administration in case something happens to you.
  7. Failure to name recipients for personal possessions. If there are special items of personal property with real or sentimental value that you want a particular beneficiary to have, you should make a binding list so there are no arguments after you are gone.
  8. Failure to have organized information for family members. By collecting your estate plan documents and key information, such as account numbers, passwords, and financial advisor's names, in one location your family will have an easier time with estate administration, and know who to call if any issues arise.
  9. Failure to prepare a Durable Power of Attorney and a Patient Advocate Designation for children over the age of 18 but away at school. At age 18, a person is considered an adult for all purposes in Michigan. Without a written legal and medical designation naming you, if your children are injured, doctors and hospitals may not tell you any confidential information or allow you to make important medical decisions.
           With diligence and periodic updates of your estate planning, you can maximize savings and minimize any problems for loved ones. Depending upon how quickly your assets were family situation changes, your estate planning should be reviewed every 2 to five years.

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