Yes, death is the ultimate grim topic. However, it is an important one to discuss with your loved ones and your estate planning attorney. If you don’t have an effective estate plan in place, you may doom your family to spending years and excessive amounts of money on court proceedings and legal fees settling your estate. You can prevent all this by creating an estate plan with a qualified estate planning attorney. It is really that simple says The San Diego Union-Tribune in the article “6 estate-planning mistakes to avoid.”
Even attorneys run into problems with their family estate plans. One attorney was devastated when her mother was diagnosed with Alzheimer’s disease. As the mounting costs continued for 10 years and tragedy struck again when her two older brothers died just before her mother passed away, she learned firsthand just how important having a plan in place can be for the family. Without a plan, everything is more challenging and costly. Here are the top six mistakes that people make:
Not having a plan. No one wants to think about death, dying, or incapacity especially when they are relatively young and healthy. However, that is the best time to put a plan in place. Start by making sure you have powers of attorney for both health care and finances; otherwise, you risk having the court make decisions on your behalf instead of a trusted family member.
Not communicating your plan or wishes. Make sure that your loved ones know what your plan is. The people whom you have chosen as your financial power of attorney and health care power of attorney need to know that they have been named and what your wishes are. Having a plan is step one; communicating your plan’s wishes and its location is step two. Miss either step and the plan may be worthless.
Doing estate planning only with taxes in mind. A comprehensive estate plan addresses much more than tax planning. It includes charitable giving, planning for a family member with special needs, succession planning, planning for children from a prior marriage, planning for your pets, and more.
Leaving assets directly to minors. Giving assets to a minor will lead to the necessity of the court appointing a custodian or guardian if one is not named in your will. There may be problems with a court-appointed guardian because he or she may have different ideas than you of how the money should be used, not to mention the associated costs.
Neglecting to update how assets are titled. Today’s families often include blended families. Therefore, how assets are titled can have a big impact on your estate plan. If one spouse purchased a home long before the second spouse and their children joined the household, who inherits the house? There are tax consequences and control issues that arise in a blended family that require advance planning and a lot of communication. In community property states, this can become particularly messy.
Failing to fund or update trusts. If a trust is not funded, it will not achieve its desired outcome. Assets that are not retitled when trusts are created will not avoid probate. These are the details that make or break an estate plan.
Estate planning is like home maintenance — it’s never truly done. As you go through life, your estate plan needs to be kept current. The death of a spouse or a child, divorce, or birth are all reasons to update the estate plan. Tax laws also change and an estate plan that worked great five years ago may not take advantage of missed opportunities that are available today.
Reference: The San Diego Union-Tribune (April 18, 2019) “6 estate-planning mistakes to avoid”