When done effectively, estate planning assures that you can keep control of yourself and your assets at every life stage. Like it or not, every one of us fits into one of the following life stages:
- Alive and well
- Alive and not well; or
- Not alive.
The method of planning you choose determines your ability keep control of your own affairs at each of these life stages. None of us can predict the timing of a chronic illness or the time of our death. But, we can control how our assets are managed or protected when sickness or death occurs.
Don’t let your expectations get derailed by these common planning traps:
1. Perils of Joint Tenancy.
It’s very tempting to try to manage or protect your assets by placing someone else’s name of your bank accounts or property. It’s easy too. Someone at the bank might even have suggested “it’s a good idea” to add a name or two onto your accounts in case “something happens.”
We don’t recommend planning based on joint tenancy because you lose immediate control over the jointly held asset and you expose your assets to the creditors of your joint tenant.
Because a Will or Living Trust do not control jointly held assets, joint tenancy risks sabotaging your distribution goals after death.
And, if you need help paying for nursing home care adding your child’s name to the deed of your home might prevent you from qualifying for Medicaid.
2. Over Reliance on Beneficiary Designations.
Naming a beneficiary on investment or retirement accounts can avoid probate upon death but provides no authority for any one else to act for you if you are sick or disabled. A beneficiary designation applies only after your death.
Without a General Durable Power of Attorney in place to manage assets during illness, your family will be stuck with an expensive trip to the probate court to obtain guardian or conservator powers.
If your beneficiary is a minor or is a person with disabilities, you will likely be putting your former spouse or the court in charge of how those assets are managed.
3. Failure to Understand the Limitations of a Last Will and Testament.
Although it’s better to have a Last Will and Testament than to die without one, most people don’t understand how a Will really works. Here are five things you should know about a Will:
- A Will offers no help to your family if you are disabled.
- A Will only applies to individually owned assets.
- A Will does not control jointly titled assets.
- A Will does not control beneficiary designation assets.
- A Will does not avoid probate when you die.
In Michigan, all Wills are subject to probate proceedings known as “informal” or “formal” administration. If you’ve read a clause in a Will that’s something like this, “I direct that my Will not be supervised by the Court,” it simply means that you are selecting the most limited form of probate possible under court rules.
If you’d like to learn more about your estate planning options click on the link below or call (231) 799-4993 to schedule a complimentary Get Acquainted Call.