Establishing an estate plan is a foundational act of love. It’s the assurance that your wishes will be honored, your family protected, and your legacy preserved. Yet, even with the best intentions and a signed set of documents, subtle but critical errors can derail the whole plan.
It is crucial to ensure your estate plan truly works when your family needs it most. Avoid these top five common estate planning mistakes:
1. Failing to Fund Your Trust
A common misunderstanding is that creating a Revocable Living Trust is the final step. In reality, a Trust is only effective if it owns your assets. If you've signed a Trust but haven't formally transferred titles, deeds, or accounts into its name, those assets will still have to go through the lengthy, expensive, and public probate process. This defeats the primary purpose of a Trust.
The Fix: A crucial part of the planning process is to ensure all appropriate assets—like real estate, bank accounts, and investment accounts—are formally "funded" into the Trust.
2. Outdated Beneficiary Designations
A Will or Trust controls assets that pass through the probate process. However, assets like life insurance policies, IRAs, 401(k)s, and Payable-on-Death (POD) accounts pass directly to the beneficiaries listed on the account's paperwork. These designations override what is written in your Will or Trust. A divorce, remarriage, or the death of a named beneficiary can leave an outdated designation that directs significant wealth to the wrong person.
The Fix: Review and update all beneficiary designations after major life events and annually, confirming they align with your overall estate plan strategy.
3. Neglecting Incapacity Planning
Most people focus on what happens after they pass away, but planning for potential incapacity is just as vital. Without a properly executed Durable Financial Power of Attorney and a Patient Advocate Designation (Healthcare Power of Attorney), your loved ones may have to go to court for a costly and stressful guardianship or conservatorship proceeding just to pay bills or make medical decisions on your behalf.
The Fix: Ensure your estate plan includes clear, comprehensive, and legally sound documents that appoint trusted individuals to manage your finances and health care if you cannot.
4. Naming Only One Successor or Contingency
Appointing a Personal Representative (Executor), Trustee, or Patient Advocate is a major decision. However, many plans only name one person, failing to account for the unexpected. What if your chosen representative predeceases you, moves out of state, or is simply unwilling or unable to serve when the time comes? The court may then appoint someone you would not have chosen.
The Fix: Always name at least two or three layers of successor representatives and guardians. This foresight ensures a smooth transition of authority, keeping control with the people you trust.
5. Treating Your Plan as a "One-and-Done" Task
The laws change, your assets change, and your family changes. An estate plan signed five years ago may not reflect current Michigan law, recent asset purchases, or the new members of your family. Reviewing and updating your documents every few years, or after any significant life event (birth, death, marriage, divorce, major inheritance), is non-negotiable for a truly robust plan.
The Fix: Commit to a regular review schedule. A small investment of time now prevents massive complications and expense for your loved ones later.
Talk to Our Grand Rapids Estate Planning Attorney
A thoughtful, up-to-date, and correctly executed estate plan is the greatest gift you can give your Michigan family. It eliminates guesswork and replaces stress with certainty. If you have questions about whether your current plan is truly protected, or if you are ready to establish a plan for the first time, the team at Inhulsen Law is ready to guide you.
Secure your family's future today by calling (616) 345-2810 for a personalized consultation.