When was the last time that you took a look at or updated your estate planning documents? I read about a survey not too long ago which found that the average time between estate plan updates was almost 20 years. This makes sense in light of life’s events. When do people usually do their first will? When the kids are little. When’s the next time they update it? When the kids graduate and leave home. And the next time? When they retire. And then the next time? When they are a little closer to utilizing the death provisions of their estate plan.
There are many reasons to update your estate plan. First there are personal reasons, both financial and non-financial. There are births, deaths, disabilities, weddings, divorces, addictions, job changes, retirements, stock market goes up and stock market goes down. All of these could be a reason to trigger an update to your plan.
There are also changes in the law, both tax and non-tax. Michigan trust law had major changes in 2000 and 2010. This year, there were changes in the trust laws regarding domestic asset protection trusts. Within the last five years, there’s been changes in the laws relating to both financial and health care powers of attorney. Last year there were changes in the laws regarding appointing after-hospital caregivers and funeral representatives. There’s also changes in the tax law on at least an annual basis at the federal level, and often times much more often. The folks in Lansing and in Washington have to justify their existence.
Take a look at your estate planning documents. Here are some of the most common reasons why you may want to consider updating them.
- You do not have at least a will and financial and health care powers of attorney.
At a minimum, the essential estate planning documents that you should have are a will, a financial power of attorney and a health care power of attorney. Many people also would benefit from a trust. We have reviewed many estate plans in which there are only one or two of the three essential estate planning documents. If you don’t have at least all three of the essential estate planning documents, find an estate planner who will prepare your estate plan properly.
- Your trust was drafted before 2010.
The Michigan Trust Code was adopted in 2010. There were major changes on how trusts are going to be drafted and interpreted in the state of Michigan. The Trust Code includes numerous default provisions which would be included in your trust when you did not have specific instructions in the trust regarding those matters. Your trust could have unintended consequences if the default provisions are not the provisions which you wanted to have governing your assets.
- Your financial and health care powers of attorney are combined.
Michigan’s health care power of attorney statute is separate and distinct from the financial power of attorney statute. There are different requirements for each including when they become effective and who may be a witness. There are different documents that must be signed by your financial and health care agents. If you do not have separate financial and health care powers of attorney, find an estate planner who will prepare your estate plan properly.
- Your power of attorney does not have a signed acknowledgment or acceptance.
Since 2012, your financial agents in your financial power of attorney are required to sign a 1 to 2 page statutory acknowledgement form that they are acting on your behalf. Also since 1989, Michigan law has required your designated patient advocates to sign an 1 or 2 page statutory acceptance of their appointment as patient advocate before they are able to legally act on your behalf. If you do not have an acknowledgment attached to your financial power of attorney or a patient advocate acceptance attached to your health care power of attorney, find an estate planner who will prepare your estate plan properly. If you have the acknowledgment or acceptance attached to your power of attorney, but not signed, have your agents sign them now when there is no urgency, rather than scrambling later gathering signatures, when they should be taking care of you.
- Your estate planner does not have a current Michigan Institute of Continuing Legal Education (ICLE) Probate Certificate.
Attorneys in Michigan are not required to take any continuing legal education after law school to keep their law license. If an attorney has a current ICLE Probate Certificate, it means that the attorney went through at least 56 hours of continuing education courses in estate planning and estate administration within 3 years and at least 12 hours annually thereafter. Although I am only required to take 40 hours of continuing education each year for my CPA, I regularly take 60 to 80 hours of continuing education courses each year. The reason why I take so many is that I am doing estate planning, which is the legal equivalent that heart surgery is to medicine. Doesn’t it make sense that your estate planner keep up-to-date with their estate planning skills in order to properly draft financial and health care powers of attorney, wills and trusts If your estate planner does not have a current Michigan ICLE Probate Certificate, find a planner that does.
- Your health care power of attorney does not include the five essential provisions.
I believe every health care power of attorney should, at a minimum, include five essential provisions, among others. 1) You should appoint a patient advocate and at least two backups to make medical and mental health care decisions for you when you cannot. 2) You should include mental health care powers to allow your patient advocate to make mental health care decisions such as those regarding dementia, anxiety or depression. 3) Health Insurance Portability and Accountability Act (HIPAA) provisions appointing your patient advocate as HIPAA representative, allowing your patient advocate to have access to your medical records and talk to your health care providers, and to sign releases of those records to other health care or insurance providers. 4) If you want to do an anatomical gift or organ donation, you can include the power to allow your patient advocate to make sure that it happens. 5) You should include living will provisions which are the instructions that you have for when to withhold or withdraw artificial means of life support at end-of-life. If your health care power of attorney does not include all five essential provisions, find an estate planner who will prepare your estate plan properly.
- You have a provision that states that two doctors determine that you are mentally disabled.
Two doctors is a common form document provision for the determination of your mental disability which triggers your successor financial agents in your financial power of attorney and your successor trustees of your trust. Since it is in the form, it is very often included in your documents without consulting with you. Most of our clients want to keep matters private within the family and choose a disability panel made up of family members who make the determination either by majority rule or by unanimous declaration that you could not effectively manage your property or financial affairs.
- Your trust is not fully-funded.
If you have a trust, it should be fully-funded now while you are alive and well, rather than after you are gone using the probate court process. Trust funding is completely and correctly designating your trust and individuals as owners, beneficiaries and insured parties of your assets. Basically, it’s putting your stuff in your trust. Are all your bank and investment accounts, stocks, bonds, mutual funds and real estate titled in the name of your trust? Do you have your trust named as beneficiary of all of your life insurance policies and retirement assets? Do you have contingent beneficiaries on all of your beneficiary designations, and do they coordinate with your will or trust? If you have real estate and/or vehicles titled in your trust’s name, do their insurance policies name your trust as an additional insured? In my 31 years of preparing and administering estate plans, I have not seen even a single new client’s existing trust that has been fully-funded.
As you can see there are many reasons why you may want to take a look at your estate planning documents and have them reviewed by an experienced estate planning attorney so that you can stay in control of your assets while you’re alive and well, provide for you and your loved ones in the event of your mental disability, and when you’re gone, give what you have to whom you want when you want the way you want, all at the lowest overall cost to you and your loved ones.
By Matthew M. Wallace, CPA, JD
Published edited July 2, 2017 in The Times Herald newspaper Port Huron, Michigan as: Why you should update estate plan