Estate planning is a process that some people neglect and others attempt with limited knowledge. Here are 10 common mistakes that should be avoided.
- Not having a will: Personal wishes, whether written or oral, will most likely not be followed in the absence of a will. Without a written plan that is set forth in a will that you create, your assets will pass to your heirs according to your state's laws of intestacy, not the way you would want.
- Doing it yourself: Even if a self-prepared will or trust is legally enforceable, estate planning is a complex legal process requiring knowledge in several areas of the law, including estate law, tax law and property law as starters.
- Not funding your revocable living trust: A properly drafted trust will prevent putting your loved ones through the expensive, lengthy and emotionally draining court probate process. Creating a trust is one thing; funding it is another. An unfunded Revocable Trust is useless. Make sure your attorney guides you on funding the trust once created.
- Failing to understand the impact of life insurance proceeds: Many people do not realize that life insurance proceeds are not controlled by the directions in your will and death benefits are not part of your estate. Confirm the identity of your death beneficiaries with your life insurance company.
- Failing to adequately plan for children with special needs: An outright gift to a child with special needs could lead to disqualification of that child from receiving public benefits. Using a special needs trust will allow you to make a bequest for the benefit of the child while keeping public benefits.
- Not properly planning for incapacity: People are living longer, and therefore the risk of lacking capacity during your lifetime is increasing. With proper estate planning you can be sure that your health and financial affairs will be taken care of in the event of your inability to take care of them yourself.
- Business planning: Who will own and control your business upon your death? Proper estate planning increases the likelihood of your business continuing as a viable operation.
- Not preparing for minor children: If you have minor children, you should have a will nominating personal guardians for the children, in the event that both you and your spouse should die prior to children reaching the age of 18. Without a plan, the court will decide where the kids will live and who will make important decisions about their money, education and life.
- Improper beneficiary designations: Similar to life insurance, your will and your beneficiary designations on IRAs, 401ks and annuities should be consistent. A will does not necessarily control the disposition of these assets.
- Not periodically updating an estate plan: People do not like to discuss dying, and therefore people often want to simply execute their estate plan documents and be done with it as quickly as possible, without considering all the economic, family, and health dynamics that should be thoughtfully addressed and monitored during your lifetime. You should plan to make periodic revisions to your estate plan.
For the best outcome, talk with a qualified elder law attorney to create your personalized estate plan.
Brian T. Treacy is an elder law and estate planning attorney with an office in Bluffton.