Almost everyone knows they should have an “estate plan.” Unfortunately, not everyone knows exactly what that means, or what it should mean for them. As a result, many people don’t bother with an estate plan, or make one that leaves important gaps that get discovered too late. Here are five common mistakes many Michiganders make when making (or not) their estate plans:
Procrastination is probably the number one estate-planning mistake, and the riskiest. The reasons for procrastinating are many: feeling that you don’t need an estate plan because you’re young and healthy, or don’t have many assets, or don’t have the time or money to sit down with a lawyer. But a simple, reasonably-priced estate plan is infinitely better than none at all, and every adult needs one, regardless of assets or current age or health–especially if they have children. Without designating a guardian for your minor children, which can only be done in an estate plan, you risk a court placing them and their assets in the care of someone you may not have chosen.
Thinking estate plans are only about money
When most people think of estate plans, they think of wills and trusts and the transferring of money and other assets. While it’s true that proper estate planning deals with the distribution of one’s worldly goods, they’re about much more. One important aspect of an estate plan, as noted above, is providing for a guardian for minor children and for how the children’s assets will be managed. Another important part of an estate plan for every adult is arranging for a Health Care Directive. You may be healthy now, but a sudden illness or accident could render you unable to make your own health care decisions. A Health Care Directive can clarify your wishes if you can’t speak for yourself, and appoint a person you trust to make health care decisions for you if you can’t make them yourself.
Setting it and forgetting it
If you’ve made a comprehensive estate plan, congratulations! Now, when was the last time you updated it? Time doesn’t freeze once a plan is made: relationships change, assets are acquired, prospective guardians may no longer be appropriate, children are born, couples divorce, laws are enacted. An estate plan that was perfect for you five years ago may be woefully out of date today. Even if your relationships and assets are the same, laws that affect your estate plan may have changed. It’s best to touch base with your estate planning attorney every couple of years to make sure your plan is updated to reflect current realities. Of course, if you experience a divorce, birth of a child, or death of a family member who was to be a guardian, you may want to update sooner.
Underinsuring your life (or your spouse’s)
If you have minor children, significant debt, or other dependents such as aged parents or disabled siblings, what will happen to them if you die? If the question gives you serious pause, your life may be underinsured. Having sufficient life insurance won’t ease your loved one’s grief at losing you, but it can provide them the relief of not having to worry about finances while they mourn their loss. Term life insurance is reasonably priced and can avoid financial devastation for your loved ones. Speak with your planning attorney to determine how much you need.
Forgetting about digital assets
In the internet age, we’re living more and more of our lives online. If your spouse or heirs don’t have access to your online accounts, user names, and passwords, make a list of every online site you would want them to be able to get to. Include account numbers, user names, and passwords for each. Then make sure this information gets into the hands of the right family members or trustees at the right time. Your estate planning attorney can help you with this.
If you live in Oakland County, Wayne County, Macomb County, or anywhere in Southeast Michigan and need to make or update an estate plan, you need the help of an experienced Michigan estate planning attorney. Contact our Bloomfield Hills office to schedule a consultation with Jim Hubbert, so that you can get support and guidance to create and maintain a plan that’s right for you.