Michigan Estate Planning Blog

Has the Pandemic Made People More Aware of Estate Planning?

 

The COVID-19 pandemic has led many more Americans to pay attention to estate planning, but just a third of them have taken action, according to a recent report.

Financial Advisor IQ’s recent article entitled “More Americans Set Up Estate Plans Since Start of Pandemic” reports that more than 50% of Americans think estate planning is at least somewhat important, senior living referral service Caring.com found in a survey of more than 2,600 American adults. Caring.com didn't disclose when the survey was conducted.

The number of those aged 18 to 34 with estate planning documents has increased 50% since the beginning of the pandemic, according to the survey. Americans who’ve suffered through a serious COVID case are also 66% more likely to have a will than those who haven’t, Caring.com found.
Roughly 48% who have had a serious case have estate planning in place, as do 41% of those who have loved ones who had one. That’s compared to 29% who have no experience with a serious COVID -19 case, according to the survey.

Overall, two out of three American adults don’t have a will — the percentage has only inched up from 32.1% in 2020 to 32.9% in 2021 to 33.1% this year.

More than 60% of those without a will have done nothing toward getting a will or any estate planning document, according to the survey.

The most cited reason for not having a will is simply not getting around to it. That’s cited by 40% of all Americans without one.

That’s particularly prevalent among those earning $80,000 a year or more and without a will, 63% of whom say they haven’t had time to do so, as well as those with postgraduate education, two out of three of whom say they haven’t got around to it, according to the survey.

On the other hand, 48% of those earning $80,000 or more say they do have a will or another estate planning document.

That represents a 7% increase since 2020, Caring.com says.

However, a third (33%) of Americans overall say they don’t have an estate plan because they don’t have enough to leave behind, according to the survey.

Meanwhile, 12% say they don’t know how to get a will or living trust, and about 13% believe it’s too expensive to set up. Another 6% think it takes too long, and 9% say they don’t have anyone to leave their assets to, Caring.com found.

Reference: Financial Advisor IQ (April 25, 2022) “More Americans Set Up Estate Plans Since Start of Pandemic”

Why Do I Need a Will?

 

Without an estate plan, it can open the door to family disputes or significant court costs to settle an estate. Nonetheless, just a little more than half of Americans over 55 have a will, according to a 2019 survey by Merrill Lynch.

The Seattle Times’ recent article entitled “Do you have a will? Without an estate plan, families can struggle to sort it out” says it’s critical to put your wishes in writing, so health care and financial decisions are handled responsibly at the end of your life.

It’s the best thing you could do to help their family and eliminate any kind of discord down the road.

This can help with the most routine aspects of settling someone’s affairs or provide additional protection for more rare occurrences.

There are three significant steps to take when estate planning, though others may be necessary for someone’s specific financial, health or family situation.

It’s best to work with an experienced estate planning attorney.

Create a living trust. A living trust states specific plans for the person creating the trust, while they’re still alive and after death. This includes instructions for medical care and how to divide and distribute assets held in the trust, including property, businesses and investments.

Write a will. Writing a will can also instruct the way real property and other assets should be transferred. Note that a will that’s entirely in someone’s own handwriting — not anyone else’s — that’s signed and dated can be valid. However, it’s important to know that a hand-written will can be disputed in court, if there are questions about its authenticity and some states do not permit them at all. A will also can nominate the guardian for your minor children.

Designate health care and financial powers of attorney. This person or people will make decisions about your medical decisions and finances, if you’re incapacitated.

Reference: The Seattle Times (May 16, 2022) “Do you have a will? Without an estate plan, families can struggle to sort it out”

Can I Make Decisions for My 18-Year-Old ‘Kid’ If She Becomes Incapacitated?

 

The Press-Enterprise’s recent article entitled “Legal documents for young adults” describes some of the important legal and estate planning documents your “kid” (who’s now an adult) should have.

HIPAA Waiver. This form allows medical personnel to provide information to the parties you’ve named in the document. Without it, even mom would be prohibited from accessing her 19-year-old’s health information—even in an emergency. However, know that this form doesn’t authorize anyone to make decisions. For that, see Health Care Directives below.

Health Care Directive. Also known as a health care power of attorney, this authorizes someone else to make health care decisions for you and details the decisions you’d like made.

Durable Power of Attorney. Once your child turns 18, you’re no longer able to act on their behalf, make decisions for them, or enter into any kind of an agreement binding them. This can be a big concern, if your adult child becomes incapacitated. A springing durable power of attorney is a document that becomes effective only upon the incapacity of the principal (the person signing the document). It’s called a “springing” power because it springs into effect upon incapacity, rather than being effective immediately.

A durable power of attorney, whether springing or immediate, states who can make decisions for you upon your incapacity and what powers the agent has. The designated agent will typically be able to access bank accounts, pay bills, file insurance claims, engage attorneys or other professionals, and in general, act on behalf of the incapacitated person.

They’ll always be your babies, but once your child turns 18, he or she is legally an adult.

Be certain that you’ve got the legal documents in place to be there for them in case of an emergency.

Remember a spring break, when they’re home for summer after their 18th birthday, or a senior road trip are all opportunities when these documents may be needed.

Reference: The Press-Enterprise (April 2, 2022) “Legal documents for young adults”

What Should I Know about Estate Planning before ‘I Do’?

Romance is in the air. Spring is the time for marriages, and with America coming out of the pandemic, wedding calendars will be filled.

AZ Big Media’s recent article entitled “5 estate planning tips for newlyweds” gives those ready to walk down the aisle a few things to consider.

1. Prenuptial Agreement. Commonly referred to as a prenup, this is a written contract that you and your spouse enter into before getting legally married. It provides details on what happens to finances and assets during your marriage and, of course, in the event of divorce. A prenup is particularly important if one of the spouses already has significant assets and earnings and wishes to protect them in the event of divorce or death.

2. Review you restate plan. Even if you come into a marriage with an existing plan, it’s out of date as soon as you’re wed.

3. Update your beneficiary designations. Much of an individual’s estate plan takes place by beneficiary designations. Decide if you want your future spouse to be a beneficiary of life insurance, IRAs, or other pay on death accounts.

4. Consider real estate. A married couple frequently opts to live in the residence of one of the spouses. This should be covered in the prenup. However, in a greater picture, decide in the event of the death of the owner, if you’d want this real estate to pass to the survivor, or would you want the survivor simply to have the right to live in the property for a specified period of time.

5. Life insurance. You want to be sure that one spouse is taken care of in the event of your death. A married couple often relies on the incomes of both spouses, but death will wreck that plan. Think about life insurance as a substitute for a spouse’s earning capacity.

If you are soon-to-be-married or recently married and want to discuss it with an expert, make an appointment with a skilled estate planning attorney.

Reference: AZ Big Media (March 23, 2022) “5 estate planning tips for newlyweds”

When Should I Update My Will?

 

CNBC’s recent article entitled “When it comes to a will or estate plan, don’t just set it and forget it” says that your Will should be updated when your personal circumstances change, could happen at any time. Some frequent triggers include:

Changes in health, including that of executors and guardians

Changes in laws, which may impact tax and legal strategies; and

Changes in state residence, which can also impact planning.

Every state has different laws as to the administration of a Will. They will vary regarding the required residence of an executor, inheritance tax laws and whether a child can be disinherited by omission.

It’s wise to review your Will every few years with an estate planning attorney, who likely will say that documents should also be reviewed when these events happen:

A substantial change in your financial status

A change of parental status, like the birth of a child

A change of guardians

Changes in designations of fiduciaries, such as the executor of the will, successor trustee of a revocable trust, attorney-in-fact, or health-care agent; and

Changes in a family member’s situation, such as if a child develops special needs and will need appropriate planning.

The article says that an overlooked trigger to updating your will is consolidation in the banking industry. If you named a bank as the executor of your estate and the bank has been bought or sold recently, you may now have a new executor.

Make certain that you know who that person or institution is – and that you trust its judgment.
It’s also important to revisit your beneficiaries after marriage or divorce.

Reference: CNBC (March 1, 2022) “When it comes to a will or estate plan, don’t just set it and forget it”

Should I have Revocable Living Trust in Estate Plan?

Kiplinger’s recent article entitled “What Assets Should Be Included in Your Trust?” says that a revocable living trust is a document that’s created to protect your assets during your lifetime. It also creates a way to seamlessly pass your assets at your death. The biggest benefit of creating a trust is avoiding probate. Placing your important assets in a trust can give you peace of mind knowing assets will be passed onto the beneficiary you designate, under the conditions you choose and without first undergoing a drawn-out probate process.

Many people think that once they sign the trust documents at their attorney’s office, they’re good to go. Setting up a trust is just half of the job. For a revocable living trust to take effect, it should be funded by transferring assets into the trust. You can fund a living trust with real estate, financial accounts, life insurance, annuity certificates, personal property, business interests and other assets.

People often ask if it’s wise to place their house in a trust. Considering that your home is potentially one of your largest assets, living trusts can be especially beneficial. A trust can transfer real estate quickly. They also help avoid the hassle of separate probate proceedings for land, commercial properties and homes that are owned out of state or held in different counties. However, property with a mortgage must be retitled in the name of the trust. Some lenders may be reluctant to do this.

There are several types of financial assets that can be owned by a trust, here are some examples:
Bonds
Stock certificates
Shareholders’ stock from closely-held corporations
Non-retirement brokerage and mutual fund accounts
Money market accounts
Cash
Checking and savings accounts
Annuities
Certificates of deposit (CD); and
Safe deposit boxes.

While creating a trust can seem to be costly and complex, it can make the inheritance process much easier on your beneficiaries. To ensure your trust performs as it is intended, work with an experienced estate planning attorney.

Reference: Kiplinger (Jan. 16, 2022) “What Assets Should Be Included in Your Trust?”

What Is a Power of Attorney?

 

Nj.com’s recent article entitled “What does becoming someone’s ‘power of attorney’ mean?” explains that a power of attorney (POA) is a legal document through which a principal states that his or her trusted agent may act on his or her behalf and for their benefit.

A power of attorney is usually centered on addressing the principal’s financial matters, such as banking, paying taxes and selling or buying property.

There is also what is known as a medical power of attorney or living will. This is a legal document through which a principal authorizes an agent to make medical decisions for him or her, when they’re incapable of making the decisions for themselves.

In either event, the agent doesn’t become personally responsible for the financial expenses incurred by the principal, unless the agent agrees to take such responsibility in his/her individual capacity.

It is, therefore, important to execute documents as an agent and indicate you’re doing so as an agent.

For example, you, Jim Smith, would sign for principal Mary Smith as follows: “Mary Smith, by Jim Smith, attorney-in-fact,” or “Jim Smith, as agent for Mary Smith, under power of attorney.”

When signing a contract with respect to nursing home care, be wary of agreeing to individually be the “responsible party.” That term may be defined to assign additional obligations, meaning being responsible for the bill.

Remember to sign everything as agent under the power of attorney.

Reference: nj.com (April 12, 2022) “What does becoming someone’s ‘power of attorney’ mean?”

 

Why Is Communication Important in Estate Planning?

 

Successful transition of wealth from generation to generation is best accomplished when family members have a shared understanding of the overall use of the family wealth. While the initial wealth creators have final say about how their assets are distributed, awareness and agreement on the part of the receiving family members regarding how the wealth is used can help preserve assets as they move to the next generation.

Forbes’ recent article entitled “Communication Can Be The Key To Creating Harmony In Multi-Generational Estate Planning” says that coming to an agreement can sometimes be difficult, especially if family members bring their own perspectives and values to the estate planning process. However, good communication can help head off potential multi-generational conflicts before they happen.

One of the most significant challenges in achieving multi-generational wealth preservation is that each individual and generation has a different outlook on wealth. Today’s families could include four or even five generations. This big gap in ages could mean differing perspectives on many topics, including:

1) Personal values. Family members may have different belief systems and values, including how they view work, social and political systems, relationships, and other topics.

2) Investing priorities. Some generations may give greater importance to socially conscious investing than others. This could create a conflict when it comes to how and where to invest.

3) Shifting economic environments. Older generations who have lived through various economic scenarios may have very different perspectives than younger generations, particularly those just coming of age in a time of high inflation and a slowing economy.

4)  Communication. Not every generation or family member is comfortable talking openly about money, especially when it comes to sharing how much is involved and how to spend it.

5)  View of the role of a financial advisor. Some family members may see a financial advisor as a trusted partner, and others may be more skeptical.

 

While these differences can create challenges in the estate planning process, you can resolve them and reach an agreement about how to best manage the family’s wealth. Begin with a plan designed for the long-term, spanning current and future generations that’s flexible to meet the family’s changing needs and shifting economic environments.

Reference: Forbes (April 18, 2022) “Communication Can Be The Key To Creating Harmony In Multi-Generational Estate Planning”

What Do I Need to Know about Wills?

 

Some people mistakenly think that not having a will enables their assets to bypass the time and expense of probate.
That’s 100% not true–if you die without a will, your property still must go through probate when there is no surviving joint owner or designated beneficiary, says FedWeek’s recent article entitled “Expressing Your Will with a Will.”
You really should have a will.
If probate avoidance is a concern, you can create a trust. By using a revocable trust, you can retain control over the trust assets while you are alive.
The assets placed in trust during your lifetime can be distributed at your death, under the instructions of the trust, without going through probate.
After you draft a will, do not forget about it.
Significant life events, like births, deaths, marriages and divorces, all may raise the need to revisit your last wishes.
After each change, be certain that your current will is both safe and accessible.
One way to do this is to leave your will with your executor, especially if you name a financial institution rather than an individual.
If you decide to keep your will somewhere else, your executor and other loved ones should know where it is.
The estate planning attorney who prepared your will should have a copy, as well as a memo stating the location of the original.
Regardless of where you put your will, you should have another document for your funeral and burial instructions.
Wills are typically not read until days or weeks after death, so it will not help your family make decisions about a funeral or a memorial service.
As a result, a separate letter should be drafted to state your final wishes. Your executor should know where these instructions can be located.
Reference: FedWeek (Feb. 22, 2022) “Expressing Your Will with a Will”

How to Get Started on an Estate Plan

 

CNBC’s recent article entitled “67% of Americans have no estate plan, survey finds. Here’s how to get started on one” reports that just a third of Americans have put these plans in place, according to a new survey from senior living referral service Caring.com.
That means that 67% are leaving what happens to them and their assets in case of disability or death up to others, including the state.
What is the biggest reason why they don’t have an estate plan? They just have not gotten around to it, according to 40% of survey respondents.
Meanwhile, 33% say they do not have enough assets to pass on to their loved ones, 13% said the estate-planning process is too costly. A total of 12% said they do not know how to get a will.
Those who have had a serious case of COVID-19 are 66% more likely to engage in estate planning compared to those who have not, according to Caring.com. About 41% of those ages 18 to 34 now see greater need for a will or other estate-planning documents following the onset of the pandemic.
Of course, there’s room for improvement, said Jim Rosenthal, CEO of Caring.com, noting only 48% of people who had a severe case of Covid have an estate plan in place.
“Even with the big scare of potential impending death, people still don’t run out and take care of what’s not that challenging to take care of,” Rosenthal said.
You should know that you do not need to have a lot of assets to decide where you want the assets you do have to go when you die, or to stipulate your preferences for your end-of-life or other care should you become incapacitated.
The first step is to become as educated as you can and consider consulting an experienced estate planning attorney. Call today to schedule your free consultation and have your questions answered- (989) 790-1461
Reference: CNBC (April 11, 2022) “67% of Americans have no estate plan, survey finds.