If you are like 70% of adults in Michigan, you have done no estate planning. You have not prepared a will, trust or financial or health care powers of attorney. The big question is: Why not?
One reason you may have done no planning is because you cannot decide what you are going to do, who is going to do what or who is going to get what? It can be overwhelming. There are lots of options. The nice thing about most wills, trusts and powers of attorney is that they are not permanent. Most all of these documents are revocable which you can change at any time. So if you cannot decide, just tentatively put something down that you can live with for the time being.
Most estate planning documents only become irrevocable upon your mental incapacity. However, you can still put instructions in certain irrevocable documents, so that they can be changed after your mental incapacity or even after your death. You are not necessarily locked into the decisions you make when you initially set up your estate plan.
Another reason you may have not have planned is that you fear death or do not want to face your own mortality. It is human nature and understandable to fear your own death. You are not alone. Or you may have been brought up in a family in which you just don’t talk about these things. You shouldn’t let these stop you from doing estate planning.
What you may not realize is that if you have done no planning, you actually have. If you have no will, your legislators have effectively drafted it for you and determined who will get what after your death. Wouldn’t you rather make those decisions yourself? Similarly, if you have no financial and healthcare powers of attorney and became mentally incapacitated, the probate judge gets involved in your life. A court appointed and supervised conservator and guardian will then be making your financial and medical and mental health care decisions.
You and your spouse may not be able to agree about how to distribute your assets and property after you are both gone, or who is going to take care of your minor children if you cannot. The nice thing about estate planning documents is that they are your documents. You and your spouse do not have to agree. You can each have your own plan. If you want your instructions to be different from your spouse’s, you can. It’s okay. I have had husbands and wives, especially in second marriage situations, have completely different estate plans. If you want to do an anatomical gift or organ donation and your spouse does not, you can do that too.
If you and your spouse cannot agree who is to be guardian of your minor children when the two of you are gone, you each put down whom you want. I call this the lifetime lottery. The role ends up with the choice of the spouse who lives the longest.
You may have not done proper planning because you have attempted to do your own estate planning through joint ownership, beneficiary designations and/or transfer or payable on death designations. You can attempt to do this and occasionally I hear of plans that work in this fashion. However, more often I hear about the plans that do not work, such as a son who was garnished and Mom’s entire life savings were taken because Mom put son’s name on her accounts as a joint owner.
You may have designated your minor grandchild as a beneficiary of upon your death. The probate court would supervise the inheritance in a conservatorship until it is distributed to your grandchild upon reaching the age of 18 when he or she gains all the wisdom and insight of adulthood and uses your inheritance to go to the University of Corvette.
Or deeding your home to you and your son as joint owners in case something happened to you and then your son refuses to sign off unless he gets his share. If you have deeded the home to you and your children as tenants in common, you may have a disgruntled wife of a son who won’t sign off on your son’s share of the home when you want to sell it. You could have your designated beneficiary of an account predecease you, but you did not have contingent beneficiaries named. The account would end up in your estate to be probated.
These do-it-yourself plans may seem attractive because they are economical to create. However, all too often I have seen these plans backfire and have unintended results. It is often more expensive to fix a do-it-yourself plan that has crashed and burned than had it been to do it right in the first place. For example, the mother who put her kids on the deed to her home she owned free and clear so in case something happened to her, the kids would get it. When one of the kids got into some tax problems with the IRS and tax liens were filed, Mom ended up having to take out a mortgage of nearly $200,000 to pay off the IRS just so she could keep her own home.
These types of do-it-yourself plans are often penny-wise and pound-foolish. You may think you may be saving money now, but you may not be in the long run. It is like the old Fram oil filter commercial, pay me now or pay me a lot more later.
For you, it may be a matter of economics. You may not be able to afford attorney drafted estate planning documents. In such instance, you can still have some protection by the use of forms. The Michigan statutory will form is generally available online. Hospital approved health care powers forms are available at certain healthcare providers. These forms out there are not as comprehensive as attorney drafted documents. However, they are usually better than having nothing at all, if you properly complete the forms.
I still haven’t seen any financial power of attorney forms sufficient for do-it-yourselfers. Unfortunately, most all do-it-yourself forms that I have reviewed over the years have been filled out improperly or were incomplete. In such cases, your family may still end up in probate court to interpret your wishes and desires, especially when it comes to end of life decisions such as when to pull the plug.
One excuse that I hear a lot is: “I’m too busy.” Well, you probably are busy. However, what I have observed over the years is that even if you are busy, you always seem to find time to do things that are important to you. You generally will make the time.
For example, when your kids were younger and you wanted to go out for the evening, you probably needed a babysitter. You most likely planned the evening out. You spent the time and wrote out a list of instructions for the babysitter such as what the kids could eat, what their schedule is, when they go to bed, where you are going to be, how you can be reached and other important instructions.
Just think of how much time that you spent planning for when you would be gone just one night.
Shouldn’t you spend at least as much time planning for when you are going to be gone forever, either physically or mentally? Make the time. Make a plan. Protect yourself and your loved ones.
With a proper estate plan in place, you can be in control while you are alive and well, protect you and your loved ones in the event of your mental disability, and after you are gone you can give what you have, to whom you want, when you want, the way you want.
By: Matthew Wallace, CPA, JD
Published edited March 16, 2014 in The Times Herald newspaper, Port Huron, Michigan as: Indecision is no excuse for not estate planning