For peace of mind over what happens to your assets when you die, an experienced estate planning attorney is essential for navigating the inherently complex process. Given that even the smallest mistake can result in requiring a probate estate to be opened, holding up the entire process of distributing assets and causing unnecessary expense. Here's a look at the most common estate planning errors we see and tips on how to avoid making these time-consuming oversights.
- Thinking that Having a Last Will and Testament Avoids Probate
While a Last Will and Testament is a crucial part of your plan, it has no effect until it is admitted to the probate court. If you want to distribute your assets upon your death by using a will, a probate estate must be opened. An estate planning attorney can advise you on the best options for your circumstances. Depending on your assets and various circumstances of your heirs, you might want to establish a trust. For example, if any of your heirs are minor children, you can put their inheritance in a trust with a trustee of your choosing to provide for their care. You will also be able to delay the age at which they receive the full inheritance, e.g., age 30. Also, you can provide instructions to the trustee on special distributions for things such as college or a vehicle that can be distributed. You will have full control over choosing a trustee who is responsible for managing the trust and distribution of the trust assets.
- Relying on Poorly Drafted Documents
Having a poorly drafted estate plan is just as bad as not having one at all. If your intentions are unclear, then there's a good chance that someone will challenge the document and delay the process. For example, the will or trust might have wording that is too general or vague, or you might have forgotten to include a loved one as a beneficiary. If there's any confusion at all about your intentions, it's going to take longer for your estate to be administered. An attorney experienced in estate planning ensures your intentions are clear, unambiguous, and precise.
- Failing to Get the Right Signatures
Signing requirements differ for the different documents that make up your estate plan. For example, a health care power of attorney must be witnessed by two people who are not close family members or health care providers, and it does not need to be notarized whereas a general durable power of attorney must be signed by two witnesses and notarized. There are even different signing requirements for different types of wills. A holographic will does not necessarily need any witnesses and a typed will must be witnessed by two competent adults. If someone challenges the document's validity, probate litigation will likely cost you (your estate) ten times what it would have cost had you hired an estate planning attorney to do it right to begin with.
- Procrastinating to Get Your Affairs in Order
Thinking about your death is not pleasant. Planning for it is something (especially healthy people) put off doing. If you don't do anything, your estate falls into intestacy. The state laws of succession will determine how your assets are divided—you won't have any control over who benefits from your estate and how much they can claim. For example, say you want your live-in partner to inherit your estate. In Michigan, the courts don't recognize an unmarried partner as your heir unless they're specified in your will. Your loved one would not benefit from your estate simply because you didn't ever make the time to meet with an attorney. Furthermore, the probate process for intestate estates takes longer to resolve. In fact, it can take several months or longer for intestate estates to settle in Michigan, which causes a lot of uncertainty and stress for your loved ones.
- Not Telling Your Heirs About Your Plans
Your heirs should know you have an estate plan and any plans you have for your funeral and burial. They should know where they can find the documents. Do not put everything in a safe without instructions on how to open the safe. Additionally, an open and honest discussion with your loved ones about end-of-life decisions will avoid controversies during these most stressful and emotional decisions about life sustaining measures.
- Forgetting to Update Your Plan
You should update your estate plan whenever there's a life change, e.g., you have a new child, someone dies, or you get a divorce. Otherwise, your plan will not reflect your circumstances, which will cause confusion and delays in administration. For example, if your trustee dies, but you don't appoint a successor, there will be a delay before your trust can be administered. Or, if you have a trust that divides everything in 7 shares, one share for each grandchild, but upon death you have 10 grandchildren. Or you instruct that your great-grandmother's Persian rug is to remain in the family, and you leave it to your first-born grandchild, but she predeceases you. Does the oldest living grandchild take the rug? These uncertainties cause friction in even the most cooperative families and can turn into family feuds.
- Not Keeping Accurate Records
When you die, your trustee or personal representative must take an inventory of your assets. If you don't keep a record of your property or tell anyone where to find the relevant paperwork, then the process will be unnecessarily delayed. Keep the following documents somewhere safe and make sure your executor knows where to find them:
- Estate Plan (trust and will and funeral and burial plans)
- Insurance policies
- Investment portfolios and stocks and bonds
- Business/Corporate documents
- Digital assets
- Bank account details
- Prenuptial and postnuptial agreements
- Choosing the Wrong Trustee/Executor
Trustees and personal representatives have a lot of responsibility. If you appoint someone without asking them first, they might refuse to act. Administration will then be delayed until someone is appointed. Ask permission before appointing someone as trustee or personal representative and be sure they understand what's involved. Consider appointing an estate planning attorney if you don't want to leave the responsibility with a loved one.
Depending on the complexity of your plan and type of assets, the trustee's responsibilities can be significant. Probate estate administration takes about a year on average. With delayed distributions of a trust and dynasty trusts, the appointed trustee should hire an attorney to provide advice on taxes and critical tasks and ensure all deadlines are met.
- Failing to Handle Creditors Properly
Trustees and personal representatives must understand how debts should be handled after your death and what it means for trust and estate administration. Creditors must receive notice of the trust or estate administration and the debts are prioritized above inheritances. A probate estate must stay open for five months to allow creditors to come forward and allow the personal representative to resolve any claims on the estate. Although television leads many to believe distribution of assets happens soon after the funeral, estate and trust administration takes time. Where a trust may be administered in a few months, probate usually takes a year. Everyone must have patience. If the trustee or personal representative pays out the assets to the beneficiaries and heirs before debts are settled, there won't be enough money to pay creditors. Again, the trustee and personal representative should seek advice from an estate planning and probate attorney to ensure that all required steps are taken in the right order.
- Forgetting Digital Assets
A digital asset is property that needs to be addressed by the trustee or personal representative. Examples of digital assets include Bitcoin, digital art, PayPal accounts, photos, music, and intellectual property. Anything you own should be part of your estate plan. If you don't plan for the distribution of these assets upon your death, then disputes between friends, family, and even colleagues could hold up the process. Also, if the trustee or personal representative do not know you have an asset, it could eventually escheat to the state. For example, if you have a few thousand dollars sitting in a PayPal account but don't mention this asset in your estate plan, it might not go to the intended beneficiary, but end up in Michigan's unclaimed property.
- Neglecting to Set Up a Power of Attorney
When people decide to get their affairs in order to avoid probate and seek the advice of an attorney, they usually are only seeking advice on how to transfer their property upon their death. Few understand that probate court is also for the living and can be avoided. A Power of Attorney (POA) gives someone the power to handle your financial affairs if you become ill or disabled. For example, they can:
- sell your house or other property
- pay your monthly bills
- make deposits on your behalf
- pay for professional services, such as a CPA or plumber
If you haven't designated anyone with POA and you lose capacity, someone must petition the probate court for the appointment. The court then grants someone the power to act in your best interests. This process can take a while, and there's a chance the probate court will appoint someone you don't want as your conservator. Often times, family members will oppose other family members from being appointed leading to a public administrator being appointed and costing the family a fortune in legal fees. Avoid any possible family battles and delays by appointing an agent while you still have capacity. Most POAs are drafted to be effective immediately and the appointed agent must accept this role.
- Taking the DIY Approach to Estate Planning
While it's tempting to draw up your plan, opting for do-it-yourself estate planning is one of the worst mistakes you can make. Without an experienced estate planning attorney guiding you, there's a far greater chance you will make fundamental errors or miss key information, thus causing delays in the administration process. Additionally, a well drafted estate plan will be flexible to accommodate a change in personal circumstances as discussed above.
Estate Planning Attorneys | Great Lakes Family Probate & Estates
The easiest way to avoid these time-consuming and costly errors is to seek help from an experienced estate planning attorney. For help planning your estate and drafting your will, contact the lawyers at Great Lakes Family Probate & Estates to arrange a free consultation. You can complete our contact form, call us on 1-888-554-5373, or email us at [email protected].