Jan 21, 2017

What All Mommies NEED to Know About Estate Planning

A Quick Guide to Estate Planning in Your 20s, 30s and 40s

“Estate Planning is for old people.” – Everyone who hasn’t read this blog post.

“I need an Estate Plan.” – You when you finish reading this blog post.

Estate Planning should be the most popular area of law in the country. I should be driving a Mercedes instead of a Ford. Why? Because literally every single person in the state of Michigan needs some form of an Estate Plan. Unfortunately, for me, most of my potential clients are blissfully unaware of that fact. Most people assume that only the very wealthy and the near-dead need an Estate Plan. For the average Michigander in their thirties or forties, Estate Planning is the last thing on their minds. Most probably have more debt than assets at this point. They have student loans, a brand-new mortgage, and two or three beautiful (and extremely expensive) kids. Who needs an Estate Plan if they have no money? Also, people in their thirties and forties don’t die. Who needs an Estate Plan now when they are going to live another fifty years? The answer to both questions is: you do. You need an Estate Plan now to protect yourself, your spouse, and your kids.

How does an Estate Plan protect you now?

Although we all feel invincible at this age, nobody is. Accidents happen. Your Estate Plan will include documents called Powers of Attorney that protect you in the event of incapacity. If you are incapacitated and unable to give informed consent, somebody else will have to make your medical decisions for you. To help demonstrate the importance of a Medical Power of Attorney, let’s create two hypothetical Mommies. Best friends Emily and Lisa are both 35 years old. Emily read this article and has an Estate Plan. Lisa did not read this article and does not have an Estate Plan. Emily and Lisa get in a car accident on the way to a much-needed Mom’s night out. Both are incapacitated and unable to make their own medical decisions. Emily has a Patient Advocate Designation appointing her husband, John, to make medical decisions for her and has made clear her wishes not to be artificially kept alive on life-support. The doctors tell Emily’s husband that she has permanent brain damage and is in a coma. Emily’s husband is able to honor her wishes and withdraw life support, lessening Emily’s suffering and his own. Lisa’s husband, Scott, is given the same terrible news by the doctors. He knows that Lisa would not want to be on life-support but her parents are praying for a miracle. Because Lisa has no Patient Advocate Designation, her husband and parents end up in a lengthy Probate Court battle. We all remember Terry Schiavo. You need a Patient Advocate Designation now. 

How does your Estate Plan protect your kids?

First of all, having Powers of Attorney in place to protect yourself is an important step toward protecting your kids. This is akin to putting your own oxygen mask on first on the airplane. Court battles that pit family members against one another are never good for the kids. If you make your wishes clear, everyone stays out of court.

Second, the Estate Plan of any person with minor children should include nominations of Guardians for those minor children in the event both parents are incapacitated or die. The decision of who you would choose to raise your children in your absence is an incredibly difficult one to consider but also one of the most important. Let’s go back to our case study. If Emily and John do not survive, their Estate Plan clearly states that they wish for Emily’s parents to become the Guardians of their three kids. Her parents live right down the street, so the kids can continue to attend the same school. If Lisa and Scott do not survive, their families will be headed to court. Their parents will spend thousands on legal fees fighting over their grandchildren. Their two kids are left with grandparents who hate each other. In fact, Lisa and Scott would have preferred Scott’s sister, but she didn’t know that. Ceremoniously selecting a family member as a ‘Godparent’ has no legal significance. You need to appoint legal Guardians for your minor children now.

Third, having a (well-drafted) Estate Plan ensures that your assets will be used for your children’s benefit in your absence. I know, I know, you have no assets. Do you have life insurance? Probably. If not, you should think about buying a term policy. Let’s assume that John had a $500,000.00 life insurance policy. John has a Trust that appoints his parents to act as Trustees if Emily is also deceased. John’s parents are able to hold the proceeds of the life insurance policy in trust for the benefit of their minor grandchildren. The funds are eventually used to pay for their college educations. Lisa also has a $500,000.00 policy but no Trust. Under Michigan law, when a person’s spouse is also deceased, children are next in line to receive an inheritance. However, minor children cannot receive inheritances. Lisa’s parents end up in court petitioning to become Conservator for their grandchildren in order to manage the inheritance on their behalf. Those poor people are spending way too much time in court. When Lisa’s son Max turns 18, he is legally entitled to distribution of his inheritance. He is given a check for $200,000.00, which he promptly spends on a fancy car, a few trips to Cancun, and jewelry for his girlfriend. Oops, so much for college. You need a Trust to protect your kids now.

Why do you need an Attorney to get an Estate Plan?

Like you, I am a member of the self-help or “Google it” generations. We are the ones most likely to use TurboTax instead of hiring a CPA and LegalZoom instead of hiring an Attorney. “Googling” is, however, ill-advised when it comes to Estate Planning. Estate Planning is highly personal. Form documents provide cookie-cutter provisions that do not address your unique circumstances or concerns. You cannot have a meaningful conversation with your computer screen. Similarly, your family cannot turn to LegalZoom to counsel them in the event that something happens to you. It is invaluable for your family members to have the option of calling up a live human being who you have met personally and to whom you have expressed your wishes and concerns.

Sarah Pangburn
Mall, Malisow & Cooney, P.C.
30445 Northwestern Hwy., Ste. 310
Farmington Hills, MI 48334
Office: (248) 538-1800
C/P: (734) 707-3165
Email: spangburn@teclf.com

Call, text (c/p) or email to set up a FREE consultation with a fellow young Mommy (who also happens to be an Attorney) to discuss your family’s needs. Be sure to mention that you are a reader of Metro Detroit Mommy!

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