You did your will 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 or 50s and have children of their own. When you did your will, you were never told that you should also have a financial power of attorney and a health care power of attorney. Your estate plan apparently is a little out of date.
If you are over the age of 18 and are mentally competent, at a minimum, you should have a will, a financial power of attorney and a health care 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 plan is in serious need of updating.
Even when you have a trust, you also need a will, a financial power of attorney and a health care power of attorney as part of your estate plan. A trust without any of these three basic documents results in serious gaps in your estate plan, which would need to be updated.
You remember the time you had your will done. It took a long time to get up the nerve to go to a lawyer and discuss your final wishes. When you did, it was tough because you had to face your own mortality. You were so relieved when your will was done. You put it away, never to be seen again until it was 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would be to have your estate planning attorney review your plan with you annually to be assured that your plan is never out of date.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 or when the kids are grown up.
Changes in the law can also affect your estate plan. The law changes can either be tax or non-tax. The politicians in Washington D.C. and in Lansing never fail to pass some sort of law changes every year that could affect the way that you do your estate plan. There have been numerous major and minor law changes that could trigger updates to your estate plan.
2012 brought about some major changes to financial power of attorneys, including changes that affect your ability to protect your assets in the event of a nursing home admission. Without proper updates, in the event of a nursing home admission, you may be unable to protect your assets for your loved ones. You may end up having to spend them down to certain limits before qualifying for Medicaid to pay for the nursing home expenses.
In 1989, 2005, 2008, 2014 and 2016, there were significant changes in the laws relating to the instructions you can include in your health care power of attorney. There are six major components, among others, that should be included in a health care power of attorney. If all six major components are not present in your health care power of attorney, it needs to be updated. The six major components are: 1) appointment of a patient advocate and at least two 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; 5) medical directive/living will provisions with instructions when to pull the plug when you are being kept alive artificially at end of life; and 6) appointment of a funeral representative and at least two backups.
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 trust default provisions added in the 2010 trust code, many of which are not favorable to trustmakers. Fortunately, there were also provisions in the 2010 trust code to allow trustmakers to avoid these default provisions. With proper drafting of your trust, many of these unfavorable provisions can be overridden.
If your trust does not specifically address those matters in the trust code default provisions, your trust is subject to those default provisions. If your trust is only about 20 or 30 pages long, the likelihood is that it will still 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, since they may have instructions to avoid those trust default provisions.
Lastly, another reason to update your plan is 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 one of the few 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 in addition to other things.
Estate planning is the legal equivalent to heart surgery. 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 six key legal areas: estate planning, elder law, business, real estate, taxation and probate. If your estate planner is not familiar with all six legal areas, he or she may not be able to properly advise you on estate planning matters.
Similarly, if your estate planner is a divorce, criminal or personal injury attorney who does estate planning, then you likely may 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 estate planners who are clearly unfamiliar with all six of these legal areas.
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 October 9, 2016 in The Times Herald newspaper, Port Huron, Michigan as: Updating you estate plan is critical to its success