For many Oakland County residents, estate planning is a crucial aspect of financial management. However, mistakes in the estate planning process happen all too frequently. There are some especially common mistakes that a majority of people make when hashing out their estate plans. Whether it involves guardianships or trusts, an estate plan can cause a multitude of problems if due care isn't taken in establishing details.
Recently, Forbes magazine brought up some important issues for people who may need to make updates to their estate plans. Life's circumstances often create changes in a family's dynamic, and updates to an estate plan become necessary to account for those changes. The last thing any Michigan resident wants is for an error to go unnoticed until it's too late. Perhaps considering some of the most common errors in estate planning will provide readers with clear insight into their own estate planning needs.
First, it often happens that Michigan residents have an incorrect guardian listed for their children. In most cases, the guardian is named when the child is very young. But as time passes, changes in the guardian's own life can result in the need to update an estate plan.
Another problem involves people's neglecting to update beneficiaries for a 401(k) or IRA. In many cases, again when the children are very young, parents name their children's grandparents as beneficiaries. But as circumstances change for the grandparents, the parents may forget to update the beneficiary information. Additionally, invalid living wills or medical powers of attorney are also common. This documentation is often required to meet the medical needs of an individual who may become incapacitated. Therefore, proper notarization of living wills and medical powers of attorney is extremely important.
It is also common for durable powers of attorney to go un-notarized. If an individual becomes incapacitated, his or her family can do very little if durable power of attorney is not clearly established. And once a first draft is written, many people neglect to update the document as circumstances change.
The Forbes article brings up another key point regarding inadequate life insurance policies. It seems that the cost of living goes up every year, and sometimes the first draft of a trust doesn't give enough provisions to make ends meet. But a well-planned trust, along with a solid life insurance policy, can appropriately anticipate increases in the cost of living.
Source: Forbes, "Five Crucial Estate Planning Mistakes You are Making," Nancy Anderson, Dec. 15, 2011