This is the second installment of our two-part blog article discussing myths and misconceptions that lead to common estate planning mistakes. If you have specific questions about your unique circumstances, the best way to obtain answers is to speak with an experienced estate planning attorney near you.
Myth 3- College students do not need estate plans unless they have an estate with substantial assets.
College students typically have specific estate planning needs when they go away to college. Prudence might dictate executing a financial power of attorney to one’s parents. If a college student wants to have his or her parents handle bank transactions or deal with creditors, a financial power of attorney can facilitate the ability of parents to assist college students in such matters. Similarly, a health care power of attorney also might be provided to parents, so they can make treatment decisions if a college student becomes incapacitated by injury or illness. Finally, you might want to provide a Health Insurance Portability and Accountability Act (HIPPA) waiver to your parents, so they can obtain diagnostic test results and insurance information. The HIPPA privacy law prevents insurance companies, hospitals, health care facilities and physicians from releasing such confidential information. If you need your parents to access such information while you are in the hospital or otherwise incapacitated, you should provide your parents with a HIPPA waiver.
Myth 4- If you have a living trust, you do not to worry about other legacy succession documents?
While a living trust often constitutes the cornerstone of an effective asset succession strategy, a comprehensive asset succession plan usually involves additional considerations and/or documents. For example, you might need a “Spillover" or "Pourover Will” that indicates your intentions regarding any assets that are not transferred into your living trust. Further, certain assets do not pass through estate planning documents like wills or trust agreements, such as the following:
· Life insurance proceeds
· Payable-on-demand bank accounts
· Real estate held as community property or joint tenancy with right of survival
· 401Ks, IRAs and other investment / retirement accounts
Assets like these pass outside of probate based on the form of title or beneficiary designations. Because these types of property do not pass via will or trust, people should periodically review beneficiary designations to confirm that they are current based on changes in family relationships and other relevant issues. Business ownership and management interests also require special conveyance documents to ensure they are handled properly upon a triggering event.
Myth 5- Once my estate plan is created, there is no longer a need to focus on estate planning issues.
A common misconception about estate planning is that it is a finite task that terminates after certain documents have been drafted. However, many types of changes make it imperative that people engage in a periodic review of their estate plan. While an estate plan should be reviewed every few years, there are specific changes that necessitate reviewing an estate plan, such as:
· Marriage or divorce
· Child or grandchild reaching the age of majority
· Birth or adoption of a child or grandchild
· Significant change in career, job or business
· Need for education funding for a child or grandchild
· Change in financial objectives of you or your marital partner
· Illness or disability of a spouse
· Changes in the circumstances of your trustee or executor
· Need to care for a disabled or elderly adult
· Purchase of a substantial asset like a home
· Disability or death of the guardian for your children designated in a will
· Significant changes in assets and liabilities
· Changes in insurance coverage
· Changes in federal and state tax law
· Severe illness or disability of a family member
· Incurring a substantial liability
· Inheritance or gift to your spouse
While this is far from a comprehensive list of the types of events that merit conducting an estate planning checkup, the breadth and scope of these triggering events should make clear that many factors can impact the effectiveness of an existing estate plan.
Myth 6- Parents should add their kids to bank accounts and/or their home to efficiently transfer such assets.
Although this strategy might make sense depending on the circumstances, this type of action should not be undertaken without legal advice and planning. If your child is added as a joint owner to a bank account, for example, the death of either parent could result in state or federal tax agencies claiming the death as a taxable event to the adult child who was added to the account for mere convenience. This may also effect the ownership, control, and succession of such assets that are not intended. There are other more effective options that can be discussed and employed to achieve your goals.
Take Control of your Plan
The bottom line is that estate planning involves an analysis of diverse facts and circumstances along with a knowledge of many areas of law including probate, estate planning, tax law, insurance law, property law and more.Abraham Law and Mathew J. Abraham have been providing effective legal representation to individuals and businesses for over twenty-five years. Abraham Law takes a common sense approach to the practice of law delivering sound advice and professional legal services unique to each client. If you have questions about estate planning or probate issues, please call us at 810-750-0440 or submit an online request to schedule an appointment or teleconference.We offer a free initial consultation to determine the specific needs of each of our clients.
Abraham | Law: Experienced and Exceptional Estate Planning Representation
Michigan Estate Planning Attorney Mathew J. Abraham and ABRAHAM | LAW have been providing effective legal representation to individuals and businesses for over twenty years. If you have questions about estate planning or probate issues, you should call ABRAHAM | LAW at 810-750-0440 or submit an online request to schedule an initial consultation.