New Year’s Estate Plan Resolutions

It’s New Year’s Eve. Have you made your New Year’s resolutions for 2018? If you have, you are with the majority of respondents of a recent YouGuv online survey. The top four resolutions for 2018 were to eat better, exercise more, spend less money and take better care of yourself. Having appropriate documents in place in the event of your mental disability or death did not even make the list.

If you are like the majority of Americans and Michiganders, you have done no planning. In today’s column, we will discuss some New Year’s resolutions that will help you to 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.

Make a Financial Power of Attorney.

You should have a durable financial power of attorney. This is a document in which you appoint one or more agents, and at least two back-ups, to make decisions over your finances and other property. You can have your financial agent be able to act immediately upon the signing of your financial power or attorney or only be able to act upon your mental disability. You can decide how that mental disability is determined. Most of our clients use a disability panel of loved ones by majority or unanimous decision determines that you are no longer capable of effectively managing your property and financial affairs. After such determination, your agent can then step in to make decisions for you.

If you are mentally disabled and have no durable financial power of attorney in place, a conservator may have to be appointed by the probate court to make financial decisions on your behalf and to take control of your property, and supervised by the probate court for the rest of your life. You may still need a conservatorship even if you have a financial power of attorney. In many instances, it was necessary for us to file in court for conservatorships for individuals with financial powers of attorney who went into a nursing home because the proper instructions were not in the document to protect their assets from nursing home spend down.

Make a Health Care Power of Attorney.

If you do not have a durable power of attorney for health care, also called a designation of patient advocate, make one. This is a document by which you appoint a health care agent, also called a patient advocate, to make medical and mental health care decisions for you when you cannot. Generally, your patient advocate can only act on your behalf if two health care professionals determine that you are not capable of making those decisions. If you are mentally disabled and have no durable power of attorney for health care, a guardian may have to be appointed by the probate court to make medical and mental health care decisions for you and be supervised by the probate court for the rest of your life.

I generally recommend that your health care power of attorney contain five key provisions, among others: 1) an appointment of a patient advocate and at least two back-ups; 2) mental health care treatment provisions to allow for decisions for matters such as Alzheimer’s or dementia; 3) anatomical gift/organ donation provisions if you want your patient advocate to facilitate such a gift; 4) Health Insurance Portability and Accountability Act (HIPAA) provisions allowing your patient advocate access to your medical records and to sign releases of those records to others; and 5) living will provisions, also called advanced medical directives, to document your wishes for your medical treatment regarding end-of-life care and the withholding or withdrawing of life sustaining treatment (when to pull the plug).

Make a Will

If you do not have a will, make one. A will is only good after your death and must go through the probate court process. Your will has two basic instructions, who gets your stuff and who makes it happen. The person whom you appoint in your will to make it happen is your personal representative (formerly executor),who distributes your property to the persons or organizations you designate.

Your will generally only governs property owned in your sole name at the time of your death and has no transfer or payable on death beneficiary designation. If you have property that is owned jointly with others, or has a transfer or payable on death beneficiary designation, that property bypasses all of the instructions in your will.

Consider a Trust

A trust is a document that is good both during your lifetime and after your death. A trust is generally not supervised by the probate court unless a party specifically requests the supervision. There are many protections and benefits of trusts that are not available with a will. They include privacy, probate avoidance, and protections for minors, young adults, surviving spouse remarriage, beneficiary divorce, beneficiary indebtedness, lazy beneficiaries, mentally disabled beneficiaries, addicted beneficiaries, the family cottage, family pets and higher education funding.

Fund Your Trust

To make your trust work and to have the results that you intend, it must be fully-funded. 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. Your trust is a vehicle, a financial vehicle. It’s like that new car sitting in your driveway. It sure looks great, but it isn’t going anywhere unless you put fuel in it. The fuel for your trust is your assets. To properly fuel your trust, it must be funded with those assets.

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. Trust funding is not something that you should attempt to do on your own. Your estate planning attorney should assist you and verify that everything has been properly funded into your trust.

Update Your Estate Planning Documents

If you already have a will, financial or health care powers of attorney or a trust, they should be updated. Just like you should have an annual health check-up, you should have an annual estate plan check-up. Annually updating your plan keeps you current with changes in your personal and family situation and your finances, tax and non-tax changes in the law and changes in your attorneys’ experience.

The proper updating and funding of your trust is critical in making your estate plan work and having the results you intend. Failure to properly update your estate plan or keep your trust properly funded may cause unintended results. These may include probate during your lifetime or after death; distributions not in accordance with your goals and objectives; additional taxes; and additional administrative, legal and other expenses.

Make Your New Year’s Resolutions Today

If you do not have any estate planning documents in place, resolve to make it happen in 2018. At a minimum, you should have financial and health care powers of attorney and a will. You may also benefit from having a revocable living trust. If you have any of these documents in place, update them in 2018. And if you have a trust, use 2018 to make sure that it is fully-funded.

By Matthew M. Wallace, CPA, JD

Published edited December 31, 2017 in The Times Herald newspaper Port Huron, Michigan as: New Year’s estate plan resolutions

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