Top 5 Estate Planning Mistakes

103 39
The following is a brief list of common estate planning mistakes that the client should keep in mind when engaging in any form of estate planning.
1 - Insufficient plan for controlling financial and property matters during incapacity Far too little time is spent in addressing how most estates will be managed for the benefit of the client while he or she is incapacitated.
Most estate plans are focused primarily on how assets will be divided among heirs.
A good estate plan should spend an equal amount of time addressing how you should be cared for and how your estate should be managed if you are no longer able to manage it on your own.
This aspect of planning can be far more beneficial than the "who gets what" provisions.
2 - Thinking children (minors and adults) don't need inheritance protection Most people assume that giving a lump sum of money to their heirs is the best approach, possibly because it is free of "red tape" or other entanglements.
However, have you ever really thought what an 18-year old is likely to do with a substantial sum of money? Wouldn't it be nice to be able to protect your child's inheritance from a divorcing spouse or even creditors? It is possible and, in fact, is one of the best benefits you can provide your children, with few strings attached.
Employing a good trust plan can allow your child to become his own trustee of his share, at times and upon such conditions as you feel are most appropriate, providing almost unlimited access to the inheritance, but also allowing the child to add an independent co-trustee to his/her share of the estate, if problems should arise.
The ensures that the money will be considered part of your estate still, off limits to creditors or divorcing spouses.
3 - Failure to adequately protect both spouse and children in blended family relationships Unfortunately, I am too frequently approached by someone who is having difficulty trying to ascertain what has happened with a parent's estate, because a surviving spouse from a second (or third, etc.
) marriage, or a child of that subsequent spouse is not sharing information, providing proper accountings, or has outright disappeared with the goods.
No matter how much you love and trust your new spouse, you have to remember that he/she is not the only person that will be involved in this equation and the prospect of money oftentimes causes good people to do very self-serving things.
Use a good trust plan and make sure that adequate remarriage restrictions and other protections exist to ensure that everyone will get what you have intended.
4 - Failure to "fund" the trust I cannot over-emphasize how big an issue this is.
I see this problem time and time again.
People go to a particular attorney (most likely one who does not specialize in estate planning), with the primary purpose of saving money on a trust plan.
What they typically get is a packet of papers and little else.
This packet goes home and gets placed on a shelf and is quickly forgotten.
Then, when it's time to administer the trust, the successor trustee finds that there is no property in the trust and a probate must be initiated to transfer title of all the assets to the trust - one of the very things we were trying to avoid by using trust planning in the first place! It is critical that all assets are properly coordinated with your trust, if it is going to be effective when you need it to be.
Far too many attorneys either skip this critically important step or leave it to the unwary client, with far too little emphasis or education.
5 - Thinking estate planning is an "event", instead of a "PROCESS" It is imperative that estate planning be thought of as a process and not a one-time event.
Laws will change, your assets will change over time (hopefully in an upwards direction) and your personal relationships will change.
All of these things must be accounted for in your estate plan.
The documents you create today will remain fairly static, even though your life's path will be rather dynamic.
Thus, your documents need to be reviewed on a regular basis to ensure that they still work for you in the manner you desire.
I recommend to clients that they review at least once every three years.
This seems to be about the time it takes on average for something to need to be addressed, whether it's a change in property ownership, a new account having been opened, a death in the family or a change in the law affecting the validity of the plan.
Don't underestimate the need for a regular review.
Subscribe to our newsletter
Sign up here to get the latest news, updates and special offers delivered directly to your inbox.
You can unsubscribe at any time

Leave A Reply

Your email address will not be published.