You have done no estate planning – no will, no trust, no financial power of attorney and no health care power of attorney. Congratulations! You are with the majority of Michiganders. Over half of our state’s adult residents have no estate plan. But for you, the big question is “Why not?”
One reason that you may not have done any planning is because you cannot decide what you want to do, who else you want to do what or who you want to get what. It can be overwhelming. You have to determine what you want to happen upon your mental incapacity and after your death. Many decisions have to be made.
There are many options available to you. If you cannot decide, just tentatively put something down that you can live with for the time being. The nice thing about most wills, trusts and powers of attorney is that they are not permanent while you are alive and well. Most all of these documents are revocable which you can change at any time.
Most of these documents only become irrevocable upon your mental incapacity or after your death. Even then, you can still put instructions in certain of these documents so that they can be changed after your mental incapacity or after your death. You are not necessarily permanently 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 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 this stop you from doing your estate planning.
If you have done no planning, you actually do have a plan. Your state legislators have drafted it for you. Upon your mental disability, the probate court will appoint a conservator to handle your property and finances and a guardian to make decisions regarding you, your health care and living arrangements. Similarly upon your death, your legislators have effectively drafted a will for you and determined who will get what share. Wouldn’t you rather have yourself or someone you choose making those decisions?
Another excuse/reason I have heard why couples have put off doing an estate plan is that the spouses may not be able to agree about how to distribute assets and property after death, or who is going to take care of the minor children when they cannot. Guess what? You and your spouse do not have to agree. These are your documents. It’s your plan. Your instructions can be different than your spouse’s. It’s okay. I have seen spouses, especially in second marriage situations, have completely different estate plans.
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 attempted a do-it-yourself estate plan through joint ownership, beneficiary designations, transfer/payable on death designations and/or self-funding a trust. We regularly see these plans blow up and fail to accomplish the individual’s wishes and result in substantial fees and expenses. I have seen life savings lost because accounts were joint and the joint owner was sued.
If you have designated a minor as a beneficiary, upon your death, the probate court would supervise the inheritance in a conservatorship until it is distributed to the beneficiary upon reaching the age of 18. At that time, the beneficiary miraculously gains all the wisdom and insight of adulthood and can handle large sums of money and uses your inheritance to go to college, 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 on the home sale unless he gets his half. Ouch! 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 initially 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, if it can be fixed, 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.
Do-it-yourself estate 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.
You may be tempted to use estate planning forms you find online. 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.
Another 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 you want a night out and you have younger kids at home, you probably need a babysitter. You most likely planned the evening out and wrote out a list of instructions for the babysitter. Or what about your last vacation? It didn’t just plan itself.
Just think of how much time that you spent planning for when you would be gone just one night, or a week or two. 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.
Matthew M. Wallace is an attorney and CPA with the Wallace Law Firm, PC in Port Huron and can be reached at 810-985-4320, Contact Matt or www.happylaw.com.
The ideas presented herein are for discussion and educational purposes only and not intended to be relied upon. For specific information regarding your needs, concerns and plan, you must consult with your tax advisor, financial planner and estate planning attorney to discuss your situation and obtain advice. © 2011-2016 Matthew M. Wallace, CPA, JD
Published edited July 10, 2016 in The Times Herald newspaper, Port Huron, Michigan as: Why haven’t you done an estate plan? Too many decisions?