You completed your estate plan years ago when the kids were little. You even named a guardian for them in the event you could not care for them. The kids are now in their 40s and have children of their own. Your estate plan is a little out of date.
You may have a will, but have no financial or health care powers of attorney. At a minimum, you should have a will, a financial power of attorney and a healthcare power of attorney. I have reviewed numerous estate plans that do not even include these three basic documents. If you are missing any of these three documents in your estate plan, then your estate planning documents need updating.
When you have a trust, you also need these three basic documents as part of your estate plan. A trust without any of these three documents results in serious gaps in your estate plan, which needs to be updated.
It took a long time to get up the nerve to go to a lawyer and discuss your final wishes because in doing so, you have to face your own mortality. So once you are done with your estate plan, you can put it away until it is needed, right? Wrong.
Just because you have completed your estate plan doesn’t mean that you don’t have to worry about it ever again. Your estate planning documents should be updated on a regular basis. How often is regular? I generally recommend that your estate plan be reviewed on an annual basis.
At a minimum, you should review your plan each year to make sure that it continues to meet your needs. A better choice would be to have your estate planning attorney review your plan with you annually to be assured that your plan is never out of date.
So why would you have a reason to do any type of updating? Well firstly, there are changes in your personal and family situation like births, deaths, marriages and divorces that can affect how you leave your stuff to your family. Illness, injury or disability of a family member can also determine how assets would be held or distributed.
There can also be changes in your financial situation. If you receive a sizeable sum of money such as an inheritance, personal injury award or lottery winnings, this can affect the type of planning that you do. The type estate plan that you set up during your working life or when the kids are younger is sometimes quite different than the estate plan you prepare after you are retired.
Changes in the law can also affect your estate plan. The law changes can either be tax or non-tax. The Feds never fail to pass some sort of tax changes every year. Non-tax changes in the law also affect the way that you do your estate plan. There have been numerous major and minor non-tax changes that could trigger updates to your estate plan.
In 1989, 2005 and 2008, there were significant changes in the laws relating to the instructions you include in your healthcare power of attorney. If all five major components of a healthcare power of attorney elements are not present, it needs to be updated. The five major components are: 1) appointment of patient advocate and back-ups; 2) mental health care powers; 3) anatomical gift/organ donation powers; 4) Health Insurance Portability and Accountability Act (HIPAA) medical record accessibility and release powers; and 5) medical directive/living will provisions with instructions when to pull the plug when you are being kept alive artificially.
Michigan statutes relating to trusts went through two substantial changes in recent history, one in 2000 and one in 2010. If your trust has not been reviewed since that time, it should be, so it can be determined what updates need to be made. There were numerous default provisions added in 2010 law, many of which are not favorable to trustmakers.
If your trust does not specifically address those matters, it is subject to those default provisions of the new trust code. If your trust is only about 20 or 30 pages long, the likelihood is that it will be subject to many of the new undesirable default provisions. More comprehensive trusts of say 50 pages or more will have a less likelihood of being subject to many of these new default provisions.
2012 brought about some major changes to financial power of attorneys and the ability of your agents to protect your assets in the event of a nursing home admission. Without proper updates, you may have to spend down all your assets in the event of a nursing home admission and be unable to protect any of those assets for your loved ones.
Lastly, another reason to update your plan is just changes in your estate planning attorney’s experience. Although not required to do so, many attorneys regularly attend continuing professional education programs. As a result, they should always be improving. However, attorneys are the only professionals in Michigan who are not required to take continuing professional education programs as a condition to maintain their licenses to practice.
Ask your estate planner how many hours of estate planning continuing professional education hours he or she has attended in the past year. If it is less than 40 hours, then most likely, your estate planner is not an estate planning attorney, but only an attorney who does estate planning. There are huge differences between estate planning attorneys and attorneys who do estate planning.
Estate planning attorneys are attorneys who have the majority of their practice devoted to estate planning and elder law matters and have comprehensive knowledge and experience in three key areas: estate planning, taxation and elder law. If your estate planner is a divorce, criminal or personal injury attorney who does estate planning, then you probably do not have an estate planning attorney and likely will have unintended results in the event of your disability or death. On almost a daily basis in our office, we are repairing these plans which are drafted by attorneys who are not estate planning attorneys.
So don’t think that once you do your estate plan, you can just pack it away and forget about it. Make sure you and/or your estate planning attorney review it every year.
By: Matthew M. Wallace, CPA, JD
Published edited August 4, 2013 in The Times Herald newspaper, Port Huron, Michigan as: Don’t forget to update your estate planning