You may have a will, financial and health care powers of attorney and also maybe a trust. You may be wondering how often your estate planning documents should be updated. Or you may question whether your existing estate planning documents are adequate to meet your needs. You are not alone in asking these questions, which I am asked often. I recommend that you review or have your estate plan reviewed each year to make sure that it is adequate to meet your needs and to account for changes in your personal situation or in the laws.
I have some clients who restate their trusts every year. I have others who ask us to annually review their plans for law and/or asset changes. Still others review their plans themselves and come to us only when they want to make a change. For these folks, there are usually also law and asset changes that must be made to keep the plan operating as designed.
If your estate planning documents were put in place before the Michigan Estates and Protective Individuals Code was implemented in 2000, they most likely need to be updated. Similarly, if your trust was drafted before the new Michigan Trust Code was implemented in 2010, it may also need to be updated. Your Durable Power of Attorney for Health Care, if it was drafted before 2008, would also most likely need to be updated. There have been changes over the last several years as to who may have access to your medical records, who has authority to make your mental health treatment decisions and who has authority over your anatomical gifts or organ donations.
The following is a little test that I call my estate planning risk barometer. The risk barometer is to assist you to make a determination if your estate planning documents should be updated. If you answer no to any of the questions, put the designated value in the corresponding slot. You then add up the total and look at the chart at the bottom, to see where you stand with regard to the updating of your plan.
For each “No” answer, insert the number in the space provided. For each “Yes” answer or “Not Applicable”, enter 0. Total the numbers below.
1. Do I have a will? 10 _____
2. Is my will, up to date? 5 _____
3. Do I have a trust? 5 _____
4. Is my trust up to date? 5 _____
5. Is my trust fully funded? 10 _____
6. Do I have a health care power of attorney? 10 _____
7. Do I have medical directives in my health care power of attorney or do I have a 10 _____
living will?
8. Do I have a financial power of attorney? 10 _____
9. If I have any minor children, have I designated someone to act as guardian? 5 _____
10. If I have minor children, have I made provisions for their care in the event of my 5 _____
disability or death?
11. If I have a handicapped or special needs child, have I made provisions for the 5 _____
appointment of a guardian in the event of my death or disability?
12. If I have a handicapped or special needs child, have I set up a special needs trust 5 _____
in the event of my death that would not disqualify the child from governmental
assistance?
13. If I have an elderly parent for whom I am caring, have I made provisions for his or 5 _____
her care upon my death or disability?
14. If I am nearing retirement, upon retirement I will no longer have tax withholdings; I 5 _____
may have to make quarterly payments for federal, state and city income taxes. Have
I made provisions for these tax payments?
15. If I have a pet, have I made provisions for its care upon my death or disability? 5 _____
16. If I or my spouse have children from a previous marriage, do I own all of my 5 _____
property in my own name and not joint with my spouse?
Total Score _____
ESTATE PLANNING RISK BAROMETER KEY
0-15 Level of risk is low.
You have done a very good job of protecting your estate.
16-30 Level of risk is moderate.
You have done a pretty good job of protecting your estate.
There may be some potential problems in your planning.
31-45 Level of risk in the “dangerous” area.
Examine areas where you are weak.
Seek advice from competent estate planning professionals that you trust.
46+ Level of risk is “severe”.
Immediately begin a comprehensive examination of your estate planning needs.
Develop a step-by-step plan to plan for your disability and to protect your estate.
Run, do not walk, to competent estate planning professionals that you trust.
By Matthew M. Wallace, CPA, JD
Published edited October 23, 2011 in The Times Herald newspaper, Port Huron, Michigan as: Time to test your estate planning IQ