Here are four estate planning mistakes that we frequently encounter. If your plan is in place and current, this will serve as validation that you are on the right track. Feel free to share this information with friends and family members, especially those who may not have a plan in place.
1. Not having a coordinated estate plan. It can be difficult to coordinate multiple beneficiary designations and titles so that your beneficiaries inherit the way you want. For example, while the benefit payable from a life insurance policy generally remains the same, real estate and investment values can fluctuate greatly. This makes it possible that one beneficiary will receive more and another will receive less than you intended. Keeping beneficiary designations and titles balanced while you are living is a challenge; impossible if you should become ill or incapacitated. Also, if a beneficiary dies, you may want to control who ultimately receives that share of your estate instead of it letting the beneficiary choose who will receive it.
One typically easy way — and probably the BEST way — to coordinate all assets into one coordinated plan is to make a trust the owner and beneficiary of as many assets as possible, then put the distribution instructions in the trust document. This ensures that each beneficiary will receive the correct proportionate amount of the estate, regardless of the value of an individual asset. To add a beneficiary or change a beneficiary’s inheritance, only the instructions in the trust document need to be updated; this is a much simpler process than having to change multiple titles and beneficiary designations. The trust can also include your instructions for what happens to a beneficiary’s share upon his/her death, preventing the inheritance from falling into the hands of someone you might not approve of.
2. Not funding a trust. A trust can only control the assets that are placed into it. The document may be written well and have excellent instructions, but unless it is funded (by changing titles and beneficiary designations), it doesn’t control anything.
3. Not titling newly acquired assets in the trust’s name. It is common for people to transfer existing assets to their trust but then forget to add new ones. Once again: a trust can only control the assets that are placed into it. Any assets purchased or accounts established after the initial funding is complete must also be titled in the name of the trust so they can be part of your complete, coordinated plan.
4. Not using a qualified attorney. Estate planning is not something that should be attempted with a kit or online program. A seemingly simple mistake or omission can have far reaching effects that only come to light after you are gone. A local, experienced estate planning attorney understands the terms and legal requirements in your state. Most have counseled many families and have seen the results of proper and improper planning. (We certainly have.) An experienced attorney can guide and assist you in making smart decisions about your estate planning, including who should be the guardian of minor children; how to provide for a child or elderly parent with special needs; how to provide for children fairly (which may not be equally); and how to protect an inheritance from our loved ones’ creditors, predators, and even themselves.
Need help with your estate planning? Please contact our office. We will be happy to help you create the plan you desire or update the one you already have.