Why You Shouldn’t Keep Your Estate Planning (Too) Simple

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In many aspects of life, the simplest option is desirable: simple, unprocessed foods, minimalist art, architecture with clean, uncluttered lines. When it comes to estate planning, though, your simplest option is likely the least desirable.

That’s because with estate planning, the simplest option is to do nothing. If you take no steps to create an estate plan, the state will step in and do it for you. This might sound great at first—no cost, no time with an attorney, no decision-making. What’s not to love?

Well, plenty, which we’ll get into in a moment. First, let’s talk about what estate planning encompasses. While most people think of estate planning as something that focuses on what happens to their possessions after they die, there is actually another aspect to estate planning, known as incapacity planning. This deals with what happens regarding your medical care and your finances if you become legally incapacitated. Many seniors may become legally incapacitated due to memory loss from Alzheimer’s or another form of dementia, but don’t think you’re in the clear because you’re young. A sudden illness, like stroke, or an accident, can cause you to become legally incapable of speaking and acting on your own behalf. What happens then?

Estate Planning by Default

If you have not made an estate plan that includes incapacity planning, and you can no longer express your wishes, state law determines what happens next. State law attempts to approximate what most people would want. It’s like a one-size-fits all garment; it may cover you, but it won’t fit like it was made for you.

In the case of legal incapacity, say, a car accident that puts you in a coma, what happens? Your next of kin may be able to make some medical decisions for you on a very limited basis. If your next of kin happens to be your two siblings, or two adult children, and they disagree about what should be done, even that may not be possible.

In general, when someone is legally incapacitated, the law provides that the probate court may appoint someone to make medical decisions for them. Obviously, this is not an instantaneous process. In the interim, you may be subjected to treatment you would not have chosen. When someone is finally appointed to act on your behalf, they may or may not know what you would want them to do, and they may or may not be willing to decide as you would have. In these cases, the court usually appoints a close relative to make decisions for you, because most people would want that. However, you run the risk of the court choosing a relative you would not want in charge of your life-and-death decisions.

Then there are your finances. If you have not created a financial power of attorney, someone must petition the court to be allowed to access your accounts and manage your finances. Once again, this may not be a person you would have chosen for the job. So if you survive the event that rendered you legally incapacitated, people you might not have chosen have control over your health care and your property.

What happens if you don’t survive? Michigan, like other states, will appoint a close relative to be the personal representative of your estate. Your property will be distributed to family members according to a formula set forth in the law. If your only heir is your nineteen year old child, they would have unrestricted access to all of your assets, but probably not the maturity to manage them. In another scenario, if you were survived only by your long-term romantic partner and an estranged sibling, your sibling would get everything, and your partner, nothing. In short, the law makes assumptions about who you would want your property going to and how they should receive it. While the law makes a reasonable guess, it’s often different from what people would want. The good news is, it’s not hard to make things turn out differently.

Avoid a Bad Outcome, Achieve Peace of Mind

The title of this blog post cautioned against keeping your estate planning too simple, but that doesn’t mean it needs to be complicated, either. What is most important is that your estate plan is designed to meet your needs. It is better to have a basic estate plan than none at all, but it’s best of all to work with an estate planning attorney who can help you figure out what you need to achieve, and how best to achieve it. Does an estate plan cost money? Yes, but probably not as much as you think. And often, the money saved by avoiding the probate process offsets much of the cost of an estate plan.

What do you need in an estate plan? Everyone should have a medical power of attorney (also called a patient advocate designation) and a financial power of attorney. You almost certainly want a will, and for many people, a living trust helps avoid probate, protect privacy, and makes the distribution of assets to beneficiaries much easier. Your estate planning attorney can help you reach other goals, too, such as protecting assets from creditors, planning for the possible need for long-term care, tax planning, and more.

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