Top 5 Mistakes in Estate Planning
Here are the top five most common mistakes in estate planning:
Not making a plan at all. If you die with no estate planning documents, you assets will either go to a surviving co-owner or they will be subject to an “intestate” probate process. With an intestate probate, the state where you reside dictates who inherits your property.
Not updating a plan or transfer on death instrument in the event of a major life change. If you wrote a Will leaving everything to your spouse, get divorced but don’t change your Will, everything will still go to your ex-spouse when you die. If you listed long time, now-ex boyfriend as the beneficiary of your 401(k), but didn’t change it after you broke up, your ex will inherit it-not your current boyfriend/husband or family.
Not planning for the future. If you draft an estate plan when you are young, it makes perfect sense to list a parent as the executor or trustee of your estate and guardian for your kids. However, if you don’t list any back-ups in case they aren’t around with you pass, it could create an unnecessary complication and require a court to appoint someone to handle your affairs or take care of your kids.
Not “funding” your trust, if you utilize a living trust in your estate plan. One of the primary reasons to create a trust is to allow your loved ones to avoid the sometime long and cumbersome process known as probate. Once an attorney creates a trust for you, it is typically your responsibility to ensure it is funded, which simply means your assets are re-titled in the name of the trust. For example, you will want to have a new deed to your home drafted transferring the title from you as an individual to you as the trustee of your trust. Without this relatively simple task, your home will need to go through probate to get to your loved ones.
Trying to do it yourself. Attorneys spend three years in law school and then many more years gaining subject matter and practice expertise. Do you know how many witnesses are necessary to make a Will valid in your state? Do they need to be independent witnesses? Does your state have anti-alienation provisions that would prevent you from giving your children your assets instead of your spouse? Should you use a Will-based plan? Should it direct the executor to create a testamentary trust? Should you create an irrevocable trust instead? What are the federal and state tax implications for each? Do you know how to draft a “spend thrift” clause for a trust to help protect the assets for beneficiaries? Do you know how to draft and record a new deed to your home? An experienced estate attorney will know all the answers to these questions and be able to advise you on how best to structure your plan to ensure your loved ones are taken care of when you are gone.