What will happen to your assets after you die? Who will take care of your children? Your pets? How will you ensure that everything you’ve worked so hard for in life will be protected and passed on to your loved ones—without creating more family stress and potential conflict?
Most people have strong opinions about what will happen after they die. Yet a 2022 survey from Caring.com found that only 1 in 3 Americans — including fewer than half of Americans older than 55 — have no estate plan in place.
Why so few? The reasons vary. Some people “just haven’t gotten around to it.” Others believe they don’t have enough assets to make a comprehensive estate plan worth it. Many simply don’t know how or where to start.
The truth is that an estate plan is valuable and important for just about everyone. Estate plans are not just for those who have reached a certain age or attained a certain level of wealth.
While it’s true that people with a lot of family members or financial assets might require more complex estate plans, even a simple estate plan can deliver enormous benefits.
What Is Estate Planning?
Estate planning comes down to making decisions about what should happen to your personal and financial affairs if you die or if you become physically or mentally incapacitated to the point that you can’t communicate your wishes.
The process of estate planning is not necessarily just about who gets the house or the retirement accounts, or who gets the payout from life insurance policies, or which charities will receive donations. A will or trust can cover what happens to your assets, but a comprehensive estate plan can also answer questions like:
- Who should look after your minor children or dependent family members with special needs?
- Who can make financial decisions on your behalf (your durable power of attorney)?
- Who can make medical decisions on your behalf (your patient advocate)?
Essential estate planning documents that would typically make up a complete estate plan include:
- Last will and testament
- Revocable living trust
- Durable power of attorney
- Designation of patient advocate
The word “estate” sometimes trips people up. Many people think they don’t have an estate — they believe the word refers to big properties and complicated investment portfolios.
In fact, everyone has an estate. The legal definition of an estate includes all your assets, from homes and cars and financial accounts to simple personal possessions that may not be expensive but have irreplaceable sentimental value.
Major Benefits of Establishing an Estate Plan
No matter the size of your family or your bank accounts, going through the estate planning process with a trusted professional can give you peace of mind and provide support for your loved ones after you’re gone.
Here are a few specific reasons why everyone should consider making an estate plan.
Ensure Dependent Family Members Are Cared For
If you have children, or if you are the guardian for a family member with special needs, what will happen to them if you suddenly die or become incapacitated? If you don’t have an estate plan, the court will appoint a legal guardian. Although the court will usually try to choose a close family member, it may not be the person you (or your child) would prefer. And if nobody steps forward, your child might enter foster care.
Your estate plan can name a preferred guardian, and it can also protect the long-term financial well-being of the child or dependent by setting up a trust or distributing inheritance payments over a long period of time.
For many people, this is the most important reason to set up a will or living trust. What could be more important than your child’s wellbeing? We strongly urge every parent and guardian to set up an estate plan to protect their children or dependent loved ones in case the unthinkable occurs.
Save Time and Money
If you die without a will in Michigan, your assets will likely have to go through probate court.
Even for relatively simple estates, probate can be a long, frustrating, and confusing process. The court will carefully go through even the most minute details of your assets and estate, identify and pay any debts and taxes you owe, and distribute the remainder. From start to finish, the probate process often takes at least six months to complete. And for complex estates, the process can easily stretch out for a year or more.
Probate is also expensive, with fees eating into the amount your loved ones eventually receive. And while your assets are tied up in probate, your loved ones can’t access it, even if they have bills to pay or investments they wish to make.
Although probate can’t always be avoided, your estate plan can help you keep most or all assets out of the probate process, which can save considerable time and money (and pass those savings on to your beneficiaries). You can even set up trusts, joint accounts, and other strategies to reduce the tax burden on assets distributed to loved ones. (This benefit matters the most with very large estates that might be subject to a federal estate tax, but it can be helpful with smaller estates too.)
Ease the Burden on Your Loved Ones
Illness, death, and grief all create difficult times for families. If you don’t have an estate plan in place, you could put a lot of difficult decisions on the shoulders of your loved ones at a time they’re least prepared to make them. Family members might not agree about the right thing to do even though they love each other and genuinely want what’s best.
Imagine if you became incapacitated and didn’t have a living will in place that spells out your wishes for end-of-life care. That could put a spouse or child in the position of making heartbreaking decisions, like when it’s time to take you off life support. Disagreement between loved ones over big decisions like healthcare and asset distribution can result in more than just hurt feelings. Sometimes, it tears families apart.
No one is better qualified to make these decisions than you are. When you spell everything out beforehand in your estate plan, you take the burden off your loved ones and reduce the chances that your death and incapacitation causes unnecessary pain and hurt for those you love the most.
In addition, an estate plan protects your privacy. Anything that goes to probate court becomes a matter of public record. Transferring assets via a living trusts or other estate plan legal documents can usually avoid probate and keep the process private.
Put Yourself in Control
Without an estate plan, your assets will get distributed according to intestate succession law in Michigan. This process follows specific, strict rules for who can inherit a portion of your estate. Intestate laws also specify what percentage of the estate a surviving spouse receives based on family circumstances.
The law in this area is complex, and it can create situations most people would not expect or see as fair. For example:
- A surviving spouse is always entitled to at least the first $100,000 of the estate’s value (if you have surviving children or grandchildren only through other relationships), and usually the first $150,000 (if you have surviving children or grandchildren together), before the remainder gets divided between other heirs. Since a significant percentage of estates are valued at less than $150,000, this means in practice that your spouse could get everything or almost everything unless you have a very large estate, even if you have several children and grandchildren (including those from a previous relationship).
- Parents are entitled to a share of the estate if you have no surviving children or grandchildren, even if you’re married. But if you have any children or grandchildren who are still living, your parents will receive nothing.
- A partner won’t get a share if you aren’t married.
- Stepchildren inherit nothing unless you legally adopted them.
- Siblings can only inherit if you have no other surviving immediate family.
- Family members who are entitled to a share under intestate succession will get their share, even if they’re estranged from the rest of the family or if they have a much more comfortable financial position than others.
Intestate succession is the “default.” But every family is unique, and what’s fair or reasonable for your family situation could vary quite a bit from the default. The best person to decide who your beneficiaries are, and how much they should receive, is you.
When Should I Start Thinking About an Estate Plan?
It’s never too early to build your estate plan. As much as we’d all like to think we will live long, healthy lives, the truth is that the future can change in an instant.
Even if you’re in your early 20s with no spouse or kids, you still may have strong preferences about who should make medical or financial decisions on your behalf (parent, sister, close friend) or who should gain access to any property or accounts you have.
An estate plan is also not something to create and then forget about. We strongly recommend revisiting your estate plan after major life events, like getting married (or divorced), having a child, or buying a home. You should also plan to revisit your estate plan every 3–5 years to make sure it still reflects your current wishes.
Get Help From West Michigan’s Estate Planning and Probate Experts
Your legacy and loves ones are worth protecting. But trying to create an estate plan yourself can be complicated, confusing, and time-consuming. It’s no wonder so many people put the estate planning process off despite how important it is.
The team at CBH Attorneys & Counselors is here to help. We take an open, honest, and empathetic approach to estate planning, and your needs always come first. We can talk you through all your options, draft and file the legal documents, and give you the peace of mind that comes from knowing your final wishes will be respected.
Cobb, D. (2022). Caring.com’s 2022 Wills Survey Finds that 1 Out of 3 Americans Without Estate Plans Think They Have Too Few Assets to Leave Behind. Caring.com. Retrieved from https://www.caring.com/caregivers/estate-planning/wills-survey/
The content provided here is for informational purposes only and should not be construed as legal advice on any subject.