Estate Plan Does Not Always Protect You From Probate

Important to Know: Having an Estate Plan Does Not Always Protect You From Probate

We often meet with people who want us to review documents prepared several years ago. We also meet with families after someone has passed away when they need guidance on what to do next. In both situations, we sometimes discover that an estate plan exists, but important parts of it were never completed or updated.

The documents may have been properly prepared. The problem is often what happened after they were signed.

A trust was never funded. A beneficiary designation was never changed. A person named in a power of attorney is no longer available. A home, business interest, or financial account was never properly connected to the plan.

These details can look minor. However, down the road, they can have a significant impact.

Estate Planning Is More Than Signing Documents

Signing your estate planning documents is an important step, but not the final one.

A comprehensive estate plan requires more than a will, trust, or power of attorney sitting in a folder. The documents need to match your current life, and your assets need to be coordinated with the instructions in those documents.

I often describe this as connecting the dots.

Your trust may say one thing. Your retirement account may name someone else. Your deed may direct the home differently. If those pieces do not work together, the result may not be what you intended.

Under Michigan probate guidance, property owned in a person’s name alone will generally require probate, while property that is correctly transferred to a trust, jointly owned with rights of survivorship, or payable to a named beneficiary may pass outside probate.

That is why the way an asset is owned can be just as important as what your documents say.

A Trust Must Be Properly Funded

One of the most common problems we see involves a trust that was created but never funded.

Funding a trust means taking the necessary steps to connect assets to it. Depending on the asset, that might involve changing ownership, preparing a deed, completing an assignment, or updating a beneficiary designation.

The trust document does not automatically include every asset. The State Bar of Michigan explains that, for the provisions of a living trust to control, assets must be transferred to the trust during the owner’s lifetime or automatically upon their death.

The trust itself may not be the problem. The problem is the missing follow-through.

Beneficiary Designations Can Change the Outcome

Life insurance, retirement accounts, annuities, and certain bank or investment accounts may pass directly to the person named on the beneficiary form. Michigan law recognizes these as transfers that can occur outside probate.

That means an old beneficiary form can create a very different result from the one described in your trust or will. Perhaps the form still names a former spouse. Maybe it names someone who has passed away. It might name one child when your current plan is intended to provide for several children.

People often assume that signing a new estate plan automatically updates these accounts. Usually, separate action is required.

A beneficiary review is not a small administrative detail. It is part of the estate plan.

The People You Chose May No Longer Be Available

Your estate plan also depends on people.

You may have named someone to manage financial matters under a power of attorney, make medical decisions, serve as trustee, or handle your estate after death. But people move. Relationships change. Health changes.

Michigan’s statutory power of attorney warns that if an agent is unable or unwilling to act, the authority may end unless a successor agent has been named. This is why successor choices matter. It is also why a plan should not be placed on a shelf and forgotten.

Small Gaps Can Create Large Problems

Comprehensive means complete.

Every “i” should be dotted. Every “t” should be crossed. We need to take a broad approach and look at the documents, assets, ownership, beneficiary forms, and the people you selected.

Sometimes a review uncovers only one or two issues-  A deed needs to be prepared. A beneficiary form needs to be updated. A successor agent needs to be added. A business interest needs to be assigned.

The fix may be simple. The impact can be significant because that correction may prevent confusion, delay, extra expense, or an unexpected and expensive probate proceeding later.

When Was Your Plan Last Reviewed?

As a practical guideline, if it has been more than two or three years since you last reviewed your estate plan, beneficiary designations, and asset inventory, now is a good time to review everything again.

You should also review your plan after a major life change, such as a marriage, divorce, death, birth, move, business change, significant purchase, or change in financial circumstances. A review does not always mean starting over. Many times, the foundation is still good. We simply need to tighten up a few things and make sure every part of the plan is properly connected.

At Abraham Law, we regularly review existing estate plans, including plans prepared by another attorney. Our goal is to make sure what you have still reflects your wishes and works the way you believe it does.

Having documents is important. Having a complete and properly implemented plan is what provides protection. Call us today to schedule a complimentary consultation. Let us review what you have, identify any gaps, and help make sure your plan is ready when your family needs it.