Estate planning is not very enjoyable for most people. I’d guess that the majority of us would rather clean out the garage or tackle our messiest closet. Fight that urge!
Instead of leaving a mess behind, I’d encourage you to pick a stretch of rainy days, spread out your paperwork, and organize your thoughts. It actually looks like we’re about to have a pretty long stretch of rain. Try to put it to good use.
Let’s start with your last will. It names your personal representative who will handle your affairs after you’re gone. Often people just leave everything to their spouse or to their children. But, you can also allow you to identify specific items you may want to leave to certain people. If you set things up properly, your last will really won’t have any control over any of your assets that already have named beneficiaries. If things are done right, your personal representative might actually have very little to do.
One major goal with estate planning is to avoid probate court and make things easier for your heirs. While probate is not the worst outcome, it just creates hoops for your family to jump through. If you are organized, you can avoid probate by assigning a “home” for each of your assets after you die.
There are basically two estate plan approaches to choose from to help avoid probate; a beneficiary-based setup or a trust-based plan.
There are some very classic reasons for going with a trust-based plan. For example, trusts are a good fit for people who have young children, loved ones with special needs, situations that involve multiple marriages or just wanting more control over how and when your assets are distributed after your death. Your estate planning attorney will steer you in the right direction.
Regardless of the probate avoidance path you choose, you should start by reviewing every account or asset you own. These include your IRAs, retirement plans, life insurance, annuities, after-tax investment accounts, bank accounts and your real estate. Make sure you’ve named both primary and contingent beneficiaries for each one.
Now, your home is a different animal. In Michigan, a Lady Bird Deed often works like a beneficiary designation for your house. The people you name will receive the property after you die, without having to deal with the probate process. If you go with a trust-based plan, your trust can own your real estate, instead.
Finally, you’ll also need some documents for situations where you’re either incapacitated or even temporarily unable to handle your own affairs. A patient advocate designation, often called a health care power of attorney, names someone to make your medical decisions for you. A durable power of attorney for financial matters names an agent to handle your business affairs. Think through the people who can play these roles for you. Remember, you can always change your mind, so don’t overthink things at the expense of doing nothing. And, we all know that doing nothing is way too easy.
Of course, I am not an attorney. Sitting down with one to draw from their professional experience is really important. But, try to arrive somewhat prepared. It will save time and money, and your estate planning attorney will appreciate it.
Estate planning is not anyone’s idea of summer fun. But neither is leaving your family with a big, disorganized mess to clean up later. Believe me, they’d much rather deal with your garage or closet.