You are age 18 or over. You are also with the majority of Michiganders and have done no estate planning. No will, no trust, no financial or health care powers of attorney, no nothing. If you became mentally incapacitated, do you know what would happen? What about if you kicked the bucket?
Let’s say you have an unfortunate accident and are unable to handle your finances or care for yourself. The only persons who are then legally able to make decisions for you are those to whom you have given prior written authority or those appointed by the probate court. Since you have done no planning, you have not given anyone prior written authority to act on your behalf. Your only option is probate court.
Your loved ones will now have to petition the probate court to appoint a conservator to handle your finances and other property. They would also have to petition the probate court to appoint a. guardian to care for you and to make your medical and mental health care decisions. These are two separate proceedings, two separate $150 filing fees and related attorney fees. Oftentimes the court will place restrictions on how much the conservator can spend or what the guardian can do.
If you die and have done no planning, you still have a plan. You just did not prepare it or sign it. Your legislators in Lansing did. Your property and other assets will be distributed in accordance with those rules which may or may not be what you wanted.
You may think of estate planning as death planning, but it is much more than that. Estate planning is keeping control of your property and other assets while you are alive and well; providing for you and your loved ones in the event of your mental disability; and then after you are gone, giving what you have, to whom you want, when you want, the way you want; all at the lowest overall cost to you and your loved ones.
Young Adults.
When your child is under age 18, you are in charge. You have full authority to handle their finances and make financial and health care decisions for them. Children become legal adults at age 18 when they miraculously gain all the wisdom and insight of adulthood. At age 18, the law says that they can make their own decisions and have all the rights and benefits of adult citizens of the United States, as you and I (with the exception of drinking, and in some states, smoking, which are reserved until the age of twenty-one).
With no planning, if your adult child has an accident or is in the hospital and is unable to make medical or mental health care decisions for him or herself, you would legally be unable to get any information, let alone make any medical treatment decisions for your child without prior permission from the court. It does not matter if you are the parent or your child is your dependent.
The privacy rules under the Health Insurance Portability and Accountability Act (HIPAA) and other laws require that all medical and mental health care providers keep all of your adult child’s medical and mental health care information confidential. The only ways that the medical or mental health care information can be released to you, the parent, is if you have been appointed patient advocate or HIPAA personal representative by your child or appointed guardian by the probate court.
My son Luke was in my office on his 18th birthday to sign his financial and health care powers of attorney. With the powers of attorney, my wife Emily and I had the ability to handle his property and finances and make his health care decisions if he became mentally incapacitated, without probate court involvement. While we were at it, Luke also signed his will so that in the unlikely event of his death, any assets that he owns would be handled by and distributed to the persons whom he wanted.
Newlyweds.
You are about to get married or have just been married. Would you like your fiancé or new spouse to be able to make decisions for you if you became mentally incapacitated as a result of an accident or injury? You may think that once you are married, your spouse has some sort of legal authority to make decisions for you if you are unable. If that is the case, you would be mistaken. Marriage grants your spouse no such authority.
Your spouse can only make such decisions for you if he or she has been granted such authority by you, or by the court. You can grant such authority to your spouse through financial and health care powers of attorney and/or a trust. These documents would allow your spouse, or fiancé, to make financial, medical and mental health care decisions if you are unable, without the need for a probate court appointed conservator or guardian.
What about your property after you are gone? If you came into the marriage with your own property, how would you want it distributed upon your death? If you have no will in Michigan, upon the instant of your marriage, your spouse is entitled to the first $150,000 of your estate after your death in 2017 and the remainder would be split 50/50 between your spouse and your kids from a prior marriage. With a will or trust, you can direct how your property and other assets are distributed upon your death.
Young Families.
You are married. You have a couple of young, healthy children. You are still young yourself. Life is good. Why would you have to worry about estate planning? Isn’t that for when you die, or for people older than you? Nope! In the event that both you and your spouse became incapacitated or died, who would take care of the kids? Where would they live? Who would make medical and other decisions for them?
If you have done no planning, someone would have to petition the probate court for guardianship of your children. When there are no family members or other loved ones who want to be guardian and your children are orphaned, Children’s Protective Services may step in and take custody of them. Your children would then become wards of the state and part of the foster care system. Your children may be split up and/or put up for adoption. Is this what you would want for your children?
To avoid both probate court guardianship proceedings and Children’s Protective Services, you and your spouse could sign a properly drafted parental appointment of a guardian for your children. In this document you designate the person(s) to whom you want to have guardianship over your children in the event of your incapacity or death. In that circumstance, all your appointee would need to do is present the guardian appointment document to the probate court, along with an acceptance of guardianship and the court would then issue letters of guardianship. No muss, no fuss. The person you want is then the guardian of your babies.
Summary.
At a minimum, the essential estate planning documents that you should have are a will, a financial power of attorney and a health care power of attorney. Many people also would benefit from a trust, and if you have minor children, a parental appointment of guardian. With the powers of attorney, you can generally avoid a court appointed conservator and guardian during your lifetime. With a will and/or a fully-funded trust, after you are gone, you can give what you have, to whom you want, when you want, the way you want; all at the lowest overall cost to you and your loved ones.
By Matthew M. Wallace, CPA, JD
Published edited August 20, 2017 in The Times Herald newspaper Port Huron, Michigan as: Who needs estate planning?