Some people have the opinion that "I am not going to be around to see what happens, so I am not going to worry about it." This can have disastrous effects on your loved ones. At the very least, you are ensuring the need for probate administration, which can be much more expensive and time-consuming than other alternatives. You are also leaving your estate to the whims of the intestacy laws, which is the "default" estate plan that the State of Michigan has set up for people that do not set up their own estate plans.
Seeing how the legislature runs the business of the State should be enough to give anyone pause, when turning over what they have worked and saved their whole life to leave behind. At best, the intestacy laws are a mere guess at what the "average" person would want to do with their estate. Since individual objectives and family dynamics vary widely, it is often a very poor substitute for a formal estate plan.
Avoid joint property
Unless you are holding assets jointly with your spouse, then joint property arrangements should be completely avoided. Titling assets jointly with another person is one of the best ways I know to set your estate plan up for failure. I have seen too many situations where the joint tenant has not followed through on promises, has jeopardized the assets or has even tried to walk away with the assets, leaving their benefactor out in the cold. There are numerous other options that are inexpensive and far safer than joint property. Beneficiary designations can generally be used, which eliminate the need for probate, without the negative consequences of holding property jointly.
Do not expect one beneficiary to "handle everything"
This is an extension of the above recommendation to avoid joint property. Some people leave everything in one person's name with the intent that that person will be "in charge" and distribute the assets equally according to the donor's wishes. This *may* work out. It can also easily lead to contested estates and astronomical legal expenses. Even in cases where the person "in charge" *wants* to do the right thing, he or she can be faced with gift tax issues because, upon the initial death, he or she is considered the OWNER of the assets. There are other ways of setting things up, such as a Trust or Will, that enable you to specify the distribution, name the person you want in charge and avoid many of the otherwise common problems.
Do not do planning on the cheap
Many people try to do estate planning on their own or by using inexpensive forms printed off the internet. These people are convinced that lawyers are too expensive and are not needed. While it may seem self-serving for me to say this, I believe that lawyers are essential to the estate planning process and can be the best way to guarantee that your estate is handled the way that you wish. This is not to say that you cannot possibly engage in your own estate planning. Someone who is intent on researching and learning all about estate planning may be able to set things up on their own, in the same way that someone can read a manual on car repair and then fix their own brakes. This is not something that most people will want to do.
By the same token, the forms that you buy on the internet *may* accomplish what you want. But if they do not, there is no one from the online company that you can complain to. A lawyer is there to back up the work they did and to reinforce your intent.
Do not engage in inconsistent planning
People will often set up a Will or Trust that outlines how they want their estate to be divided. They then title their assets in such a way that the Will or Trust provisions have no effect. A Will only governs assets that are in your own name, at the time of your death. It has no bearing whatsoever, on jointly held assets or assets with beneficiary designations. A Trust only governs assets that are titled in the Trust. If the assets are not held by the Trust, then the Trust may be absolutely worthless. It is not HAVING the Trust that is the important thing. It is having the assets properly TITLED in the Trust that guarantees that the Trust provisions will apply.
Along these same lines, if you want to have your estate divided equally, do not have a substantial part of your estate jointly owned or with beneficiaries designated, UNLESS all of the beneficiaries are equal and all of the joint owners are listed.
Do not forget a General Durable Power of Attorney form
Sometimes these forms are called Financial Power of Attorney forms. They are essential and are more important than having a Will or Trust. These forms provide for you and YOUR care, while you are alive, but incapacitated. They allow you to name someone to step in and handle your affairs when you cannot do so yourself. If properly set up, they enable you to avoid the need for probate proceedings to appoint a guardian and/or conservator. This can save thousands of dollars and weeks of frustration for you and your family.
These forms cease to have any effect upon your death. In most cases, they do not have any effect while you are alive and competent. They only are effective when you are incapacitated, (when you need them to be).
Do not delay
The best time to set up your estate planning is when you are able to consider everything calmly and without the added stress of illness or impending surgery. Once your estate plan is established, it will normally continue in effect indefinitely. Changes that need to be made can be done at any time.
Many people delay estate planning until they are facing a serious illness or surgery. This is not the best time to plan, because you cannot always think clearly about what you want to have done. On the other hand, it is better to make sure that your planning is in place than to leave it to chance.
You may not need to have an estate plan for many many years. If you need it and do not have it, however, it could cause you and your loved ones a great deal of stress and anxiety, not to mention needless costs and fees.
Do not forget to update your estate plans when needed
As stated above, once in place, most estate plans continue on, indefinitely. The objectives they reflect may not remain the same, however. In the event of a death or a divorce, for example, changes may need to be made. If changes are not made, the original intent may largely be thwarted. The same is true of beneficiary designations and joint property. There are federal laws that provide that the beneficiary named on life insurance policies is the person entitled to the money. If you get divorced and your former spouse remains listed as the beneficiary, that may totally defeat your expectations and intent.
The same thing is true when a person has an estate plan and then gets married. Marriage changes a lot of default provisions under State and Federal law. At the very least, the estate plan should be updated to reflect the marriage and to state that the person's intent is the same, in spite of the marriage.
Do not forget to plan if you have stepchildren
If you want to make provisions for stepchildren, you must do so affirmatively. Otherwise, they are not entitled to any part of your estate, under Michigan law. If you intend for them to receive anything, it is essential that you undertake the necessary planning, whether it be by beneficiary designation, Will or Trust, or otherwise.
Do Not leave property to minors
Property should never be left to minors. A minor is not allowed to hold title to property in Michigan. If you leave assets for minors, you are ensuring that there will need to be additional ongoing probate proceedings to manage their assets. Perhaps even worse, upon attaining the age of 18, all of the property is turned over to the minor in a lump sum. It is far better to establish a trust, whenever there are minors involved. This allows you to not only avoid probate altogether, but also to stagger the distribution of your estate so that the beneficiary receives his or her share when better able to handle it.
BONUS: Do not assume that you cannot afford to have professional advice
Most attorneys do not charge for an initial consultation. At the very least, you should contact an estate planning attorney in your area, explain your situation and your objectives, and see what he or she recommends. If you do not know an attorney or cannot get a recommendation from a friend or relative, and if you feel uncomfortable contacting someone out of the blue from the phone book or internet, at least check with someone on AVVO to see if you can get an answer to any questions you might have.
You may be surprised to learn that you can have an attorney prepare customized documents for you that cost you FAR less than you expected. You will have someone to stand behind the documents and defend your intent, if you are unable to do so, yourself. And you will have someone to contact if you ever have questions or concerns about the plan that you have drawn up, updating your estate plan, or any other matter affecting your estate or beneficiaries.
Estate planning should leave you with a sense of peace of mind that everything you have worked hard for is protected and will be handled in the manner you wish. It is difficult to have this peace of mind if you do not know if the form you signed off the internet will do what it is supposed to, or if you cannot call someone when you have a question or a problem.
In most cases, the estate plan is only used when you are either incapacitated or deceased. There is only one chance to "get it right." If you set up your estate plan with an experienced attorney, you have the best opportunity to make sure your wishes will be honored and carried out.
In addition to your peace of mind, your loved ones will be grateful that you cared enough about them to spare them unnecessary costs and hassles. No one likes to think about what will happen when they are gone. We have found that many clients take comfort in knowing that they have done everything they can to ensure their family is taken care of.