Putting off your plan, letting it go stale, or leaning on a will alone are the kinds of decisions that look harmless today and turn into probate court tomorrow. Here is what to watch for.
1. Failing to create an estate plan (procrastinating)
The most significant mistake is having no plan at all — or knowing you need one and putting it off until it's too late. Without a plan in place, the state of Michigan distributes your assets according to state law, which may not align with your wishes. A comprehensive plan spells out your intentions for your assets, your healthcare decisions, and more. Without one, your loved ones can be tied up in the probate court system, spending thousands of dollars and months of their time to resolve your estate.
2. Not updating your estate planning documents
An estate plan is not a once-and-done deal. Your life circumstances and finances change over time, and your plan should reflect and protect those changes. Outdated documents lead to incorrect information, confusion, and legal issues. Work with a firm that makes it a practice to check in with clients and keep documents current through the years — here are the documents worth reviewing each year.
3. Overlooking the tax implications
It's crucial to consider how taxes affect the decisions in your planning documents. While Michigan does not currently impose its own estate or inheritance tax, larger estates can still face federal estate tax, and the way you structure gifts, retirement accounts, and appreciated assets affects income tax, capital gains, and the step-up in basis your heirs receive. Working with an attorney who understands these interactions can help reduce the tax burden your loved ones inherit.
4. Not choosing the right executor
Your executor manages and distributes your assets after you pass away. Choosing the wrong person can lead to legal battles and conflict among your loved ones. Pick someone trustworthy, responsible, and capable of carrying out your wishes — this is a decision worth thinking through carefully.
5. Not creating a trust, or relying solely on a will
A common misconception is that a will protects your assets and guarantees your estate is distributed as you intend. In reality, a will goes first through probate court, where a judge may determine that other people — including family members and creditors — are entitled to your assets. A trust can help protect your assets, avoid probate, and keep your wishes intact.
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6. Not considering the high cost of long-term care
As you age, you may need long-term care — and it can be very expensive, often more than ten thousand dollars per month. Failing to account for these costs can place a major financial burden on your loved ones. An estate planner who understands long-term care planning and Medicaid can help make sure your estate passes to your family instead of being consumed entirely by care.
7. Not planning for incapacity
Incapacity planning means naming a trusted person to make healthcare and financial decisions if you can't — your Healthcare Power of Attorney and Financial Power of Attorney. Without them, loved ones may not even be allowed into your hospital room or into the decision-making process, because you haven't given them that authority. And once you're deemed incapacitated, it's too late to grant it. Up-to-date POA documents make sure your family can reach you and follow your wishes when you can't speak for yourself.
8. Not considering digital assets
Most people now have digital assets — social media accounts, online banking, email, even cryptocurrency. Leaving them out of your plan can expose them to hacking, probate, and other problems. Include your digital assets so they're protected and distributed according to your wishes.
9. Not communicating your wishes
Talking about finances and death is uncomfortable, but without clear communication your loved ones can end up in probate court facing high costs and long delays. At a minimum, tell your family where your estate planning documents are kept. Better still, include them in the conversations and meetings during the planning process so they understand how your documents work. In our experience, involving the family members who matter most leads to a plan that truly fits.
10. Not seeking professional advice
Estate planning is complex, and professional guidance helps. An experienced estate planning firm can help you navigate the legal and financial aspects — and the asset protection strategies — while making sure your plan reflects your wishes. Avoid some or all of these mistakes, and you make the process go smoothly for your loved ones when it matters most.
