Michigan families can experience unnecessary taxes, costly and stressful legal problems and lose inheritances when wills are poorly drafted or do not address common situations. Careful estate planning can help avoid these problems.
Failing to name a secondary beneficiary on insurance policies and retirement accounts is a very common but costly mistake. If a successor beneficiary is not identified after the original beneficiary has died, the estate may be hampered with probate litigation, creditors and other delays.
Tax benefits, such as a stretch IRA, which allows a person to draw out IRA distributions over their lifetime, are also lost. Failing to update beneficiaries can also lead to situations where a former spouse receives IRA distributions instead of current family members.
Similarly, the deaths of potential beneficiaries must be considered. If one of two beneficiaries dies, the estate must identify whether the inheritance goes only to the surviving beneficiary or is also shared with the deceased beneficiary’s surviving spouse or children.
Well-intended gifts should be carefully planned. Heirs may face costly fees and time to comply with conditions and other problems if gifts, such as real estate, have complicated conditions and other procedures.
While a spouse is still living, they should also consider joint ownership of property. Otherwise, the surviving spouse may face higher taxes and other delays.
People often forget to place assets in their will or consider property they will own before they die but did not have when they executed their estate documents. A residuary clause in a will may deal with these issues.
People should also prepare for the unexpected, such as a change in their assets, a spouse becoming seriously ill, their children divorcing or an heir who is unable to control their inheritance because of poor health or substance abuse. Creating a trust can help determine how money will be distributed and create conditions governing its use.
An attorney can help people plan for their own mortality and avoid common estate planning mistakes that burden heirs. They may also help ensure that proper and legally-valid documents address these situations.