The most common and most significant estate planning error is failing to plan at all. About half of U.S.
adults don’t even have a will, argu-ably the most basic estate planning
document. Unfortunately, many of
those who have taken basic steps
to provide for their heirs have overlooked critical issues—issues that
may come back to haunt them in
their lifetimes, or their heirs later.
Whether you have an estate plan in
place or are just beginning to educate yourself about your options,
be aware of (and avoid) these frequent estate planning mistakes:
1. Not planning for disability: Many people think of estate planning simply as a
means of providing for the loved ones
who survive them. While this selfless pri-oritization may be admirable, it can also
be dangerous. A thorough estate plan will
always include provisions for managing
incapacity or disability, from healthcare
directives to plans for management of
your finances and care of your children.
2. Not keeping documents up to date:
Wills, trusts, and other estate planning
documents aren’t necessarily one-time
endeavors. As circumstances in your life
change, those documents may need to
be updated, and failing to keep them
current can create significant complications for your loved ones. Some examples of events that might require updating of your estate plan include marriage,
divorce, the birth or death of an heir, or
an heir reaching the age of majority.
3. Leaving assets or life insurance proceeds directly to a child: A minor child
can’t legally manage his or her own assets, which means that someone else
will assume control of those assets until
your child reaches the age of majority.
Protect your children by choosing who
will be responsible for managing their as-
Learn how to
protect what is
important to you.
“WE PROTECT WHAT IS IMPORTANT TO YOU.”
Avoid These 8 Common Estate Planning Mistakes
sets and how that process will be structured when you create your estate plan.
4. Misusing joint ownership of property:
Joint ownership of property with rights
of survivorship can be a simple, seamless
means of passing certain types of property upon your death. But, joint ownership
has pitfalls, as well, including putting your
asset at risk during your lifetime and increasing the tax burden on the surviving
owner after your death. Ensure that you
understand all of the ramifications of joint
ownership before choosing that route.
5. Ignoring tax consequences: The possible tax consequences of passing real
property to a non-spouse through joint
ownership is just one of the many tax
issues that must be considered in creating a solid estate plan. Tax obligations
depend not just on the amount passed,
but the type of asset passed and how
it changes hands. To avoid tax-related
estate planning mistakes, work closely with an experienced estate lawyer
and tax advisor to construct your plan.
6. Choosing the wrong trustee or administrator: The person closest to you
isn’t necessarily the person best qualified to manage your estate or the trust
you create for the benefit of your loved
ones. One of the most common estate
planning mistakes is prioritizing a loved
one’s emotional response to your choice
over the objective factors that will determine who will do the best job for your
heirs. You don’t do your heirs or the administrator / trustee any favors when
you put the wrong person in charge.
7. Assuming your family will cooperate: If
your family is close and you have good re-
lationships with all of your heirs, it’s easy
to assume that they’ll do the right thing
and work together after your death. That
assumption leads many people to believe
their heirs can work out the details on
their own. However, in the wake of the loss
of a loved one, tensions often run high. In
addition, reasonable people can and do
differ about what is “right” or “fair.” Save
your loved ones this added stress by mak-
ing a very clear plan that doesn’t require
them to resolve issues among themselves.
8. Automatically treating all heirs the
same: It’s important to remember that
“equal” doesn’t necessarily mean “the
same.” Imagine, for example, that you
have a married child in his thirties with
a good job and three children, a col-lege-aged child who has no dependents
and has not yet held a job, and a child in
his late twenties who has a serious addiction. While you may wish to provide
equally for all three, the best way to do
so may differ dramatically. While the oldest may be in a position to manage his
inheritance, the youngest may simply not
be ready to handle a large influx of cash,
and the one struggling with addiction may
actually be endangered by a significant
direct inheritance. Provide for your heirs
in the manner that most benefits them,
even if that means different approaches.
Attorney Advertising. The information
provided in this article is for informational purposes only and should not be construed as a legal advice. It is not intended
to create an attorney-client relationship
with a reader and should not be relied
upon without first seeking professional legal counsel. The choice of a lawyer
is an important decision and should not
be based solely upon advertisements.