Let’s talk about death. Specifically – have you planned what will happen after yours?
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 estate plan in place, and one that is done correctly, you may doom your family to spending years and more money than you’d want on court proceedings and legal fees to settle 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 first hand 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 making 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 who have been 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 its wishes and its location is step two. Miss one step, and the plan is 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, who may have a different idea of how the money should be used, not to mention associated costs.
Neglecting to update how assets are titled. Today’s family often means a blended family. Therefore, how assets are titled can have a big impact. 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 requires 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, the 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”
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