The statistics are quite staggering: half of Americans do not have even the most basic estate planning documents (Forbes.com). That means that only half of Americans actually have a say in what will happen if they pass away or become incapacitated…the other half are relying on their state’s one-size-fits-all law and the state court system. Seriously?! You want legislators and judges who don’t know you from “Joe” next door to be determining who gets what if you pass away or worse yet, who will make decisions on your behalf if you become incapacitated?
The most common reason in my experience is procrastination. I can’t count how many times I’ve met with and talked with great people who say, “we’ve been thinking about it for a long time…we just kept putting it off.” Well, here’s another thing to think about in addition to needing to do your own planning. What planning, if any, have your parents done? That’s right…do you know if your parents have an estate plan? If so, do you know what it says and who they picked to carry out key rolls.
Your parent’s estate plan should be important to you for 2 reasons (and not the reasons you think): (1) you may likely be the one (or one of) who has to take care of their affairs if something happens to them, and (2) if something happens to you before them, their plan may control some of how your things are distributed.
Point #1: if people do have an estate plan in place, they typically pick relatives to carry out the duties of administering the Michigan estate (through Michigan probate or through Michigan –trust administration). Guess what? That could be you. Do you know what your duties would be? Do you know what your parents have done or have not done to ease the burden on you. Think about it. If something happens to your parents the last thing you want to think about is handling their financial affairs and administering their estate. You’ve just lost folks who were very dear to you…what do you want to have on your shoulders in addition to the loss?
Point #2: I have had several great people I’ve met with who have named their parents (or in-laws) as the beneficiaries of their retirement accounts and/or their life insurance. The reason: they didn’t want it to go through probate if they passed away and their children were under 18 (money paid to a minor child upon the parent’s passing must go through the probate court process). BIG uh oh with that “planning technique.” Why? Because once that money is paid to the parents it is their money. I don’t doubt that they are great people and would do whatever you requested, but there are a lot of things over which they have no control. Do they have creditors? What if they were in a car accident? Because it is their money, it is open to all those risks (including divorce)!
And more importantly for the subject of this post, what does their estate plan say? Most parents who don’t meet with a relationship-based Michigan estate planning attorney will name their children equally as the recipients of their estate when they die. Do you see the uh-oh? That means you and your siblings (if any) would get equal shares without any special provision for the resources you made for your children. For example, if you have 2 siblings, that would mean that your children will only receive 1/3 of the insurance and/or retirement benefits you wanted them to receive.
See why your parents’ estate plan is so important? I encourage you to talk with your parents about their planning (or lack of a plan!). And if you or they have any questions, call us at (616) 827-7596.
Michael Lichterman is an estate planning attorney who helps families and business owners create a lasting legacy by planning for their Whole Family Wealth™. This goes beyond merely planning for finances – it’s about who your are and what’s important to you. He focuses on planning for the “experienced” generation, the “sandwich generation” (caring for parents and children), doctors/physicians, nurses, lawyers, dentists, professionals with minor children, and family owned business succession – and he is privileged to do so from a Christian perspective. He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients – many of which have become great friends.