Last week we discussed updating your estate planning documents and some of the reasons you should update. As we also discussed, if you are over the age of 18, at a minimum, you should have a will, a financial power of attorney and a healthcare power of attorney. You may also benefit from having a trust.
Your financial power of attorney not only should have a financial agent appointment, with back-ups, it should also include broad gifting powers, if you want to protect your assets in the event of a nursing home admission. In addition to appointment of a Patient Advocate and back-ups, your health care power of attorney should also include medical directives/living will provisions, mental healthcare powers, anatomical gift powers and Health Insurance Portability and Accountability Act access and release provisions.
We 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, the laws or your estate planner’s experience. We have a number of our clients 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 updating. Your durable power of attorney for health care would also likely need to be updated if it was drafted before 2008. Similarly, your financial power of attorney may need updating if it was drafted before October, 2012.
Every few years, we like to provide you with a little test to assist you to make a determination if your estate planning documents should be updated. We call this our estate planning risk barometer. Below is an updated and revised version of our estate planning risk barometer.
To score the test, for each “No” answer, insert the number in the space provided. For each “Yes” answer or “Not Applicable”, enter 0. Total the numbers below and look at the chart at the bottom to see where you stand with regard to the updating of your plan.
1. Do I have a will? 10 _____
2. Has my will been updated and/or reviewed within the last year? 5 _____
3. Do I have a trust? 5 _____
4. Has my trust been updated and/or reviewed within the last year 5 _____
5. Is my trust fully funded, including retirement accounts and homeowners insurance? 10 _____
6. Do I have a health care power of attorney? 10 _____
7. Do I have medical directives/living will provisions, mental healthcare powers and Health Insurance Portability and Accountability Act provisions in my health care power of attorney? 10 _____
8. Do I have a general durable financial power of attorney? 10 _____
9. Does my general durable financial power of attorney have broad gifting powers to protect my assets in the event of nursing home admission? 5 _____
10. If I have minor children, have I made provisions for their care and a guardian in the event of my disability or death? 5 _____
11. If I have a mentally disabled or special needs child, have I made provisions for the appointment of a guardian in the event of my death or disability? 5 _____
12. If I have a mentally disabled or special needs child, have I set up a special needs trust in the event of my death that would not disqualify my child from governmental assistance 5 _____
13. If I have an elderly parent for whom I am caring, have I made provisions for his or her care upon my death or disability? 5 _____
14. If I am retired or nearing retirement, have I made provisions to pay federal, state and city income taxes. 5 _____
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 property in my own name or in the name of my trust and not held jointly with my spouse? 5 _____
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 August 11, 2013 in The Times Herald newspaper, Port Huron, Michigan as: Do you need to update your estate plan?