Our Michigan readers are probably familiar with numerous posts here that have detailed the many various parts that can make up a comprehensive estate plan. Considering the benefits of trusts, long-term planning and powers of attorney is part of evaluating which components are right for each individual or family's situation. With so many options to consider, most Michigan residents would probably think that over-planning is more likely to occur than coming up short. But, according to a recent article, having an estate plan that is less than comprehensive is one of the more common mistakes in estate planning.
As stated in the article, simply having a will is almost never enough to attempt to plan for all possible scenarios. Because there can be different categories of assets to be considered in a plan to designate property distribution - mainly the difference between probate and non-probate assets - different estate planning options will likely be needed for most individuals, beyond just a will. Probate assets are those assets which pass through the probate court when they are distributed to designated beneficiaries. Non-probate assets, like, say, a life insurance policy, do not go through the probate process and are paid out automatically to the designated beneficiary. However, the article pointed out a great example of situation where even non-probate assets may need additional planning.
Here is the scenario: an elderly husband has named his elderly wife as the beneficiary of his life insurance policy. However, at the time the elderly husband dies his wife, who is at an advanced age, is suffering from dementia and resides in a nursing home because of her incapacity. Is the wife in a position to competently deal with that life insurance payout? Clearly not, which is why someone in the husband's position in this scenario would probably want to review the estate plan, if possible, to set up a trust for those funds to go into, in which the trust would be designated for the wife's benefit.
Believing that a will is good enough is usually a mistake. Michigan residents need to approach estate planning from the standpoint of attempting to plan for all possible scenarios.
Source: Dunwoody Crier, "Common estate planning errors," Lewis Walker, Oct. 8, 2013