If you are currently working on your estate plan, you have probably heard a few horror stories about estate plans gone wrong. In such cases, usually a document was not properly drafted or a litigious family member caused a ruckus. Surely you are wondering what the top estate planning mistakes are, and how to avoid them. We have listed a few questions below that you should ask yourself to make sure you avoid these mistakes.
Did You Fund Your Trust?
Not funding a trust is one of the biggest estate planning mistakes. If there are no assets in the trust, the trust may be useless.
Did You Jointly Title Assets?
People sometimes title assets under tenancy by the entirety / joint-tenancy with-right-of-survivorship so those assets avoid probate. Though they will avoid probate, they will be subject to applicable federal and state estate taxes when the second person passes away. Since everything ends up in the hands of the survivor, they could end up in the hands of a new spouse or family. It is better to re-title these properties into the name of your trust. It often surprises people to learn that they have a well drafted trust and estate plan, but because of the way their assets are titled, it doesn’t work.
Do You Own Life Insurance in Your Own Name?
If your life insurance policy is titled in your name, the death benefit may be payable to a beneficiary directly, which may not be the result you want. What if they are a minor child? It will also be included in your taxable estate, possibly causing a large portion of it to be used for estate taxes. This can be avoided by creating an irrevocable life insurance trust.
Have You Left Assets Outright to Beneficiaries?
Assets that are left outright to heirs and beneficiaries are exposed to creditors. It is safer to leave assets in trust for the benefit of your heirs and beneficiaries. Not only that, but if you’ve named your children directly, are they old enough and skilled enough to avoid wasting what you’ve put together?
Have You Done any Mental Disability Planning?
If you do not plan what is to be done in case you suffer a mental or physical disability, the court will order and supervise guardianship and conservatorship appointment if and when the situation arises. You can use a living trust to choose who will decide when you are disabled, who the disability trustee will be, and how you want to be cared for during your disability.
Do You Have a Living Will?
Some people incorrectly assume that because they have a living trust they do not need a living will. A living will is needed to give physicians guidelines to follow in the event you are in a terminal condition or in a persistent vegetative state.
Have You Communicated with Your Trustees and Beneficiaries?
Let the people you have named as representatives, trustees, and beneficiaries in your estate plan know their role to ensure a smooth transition during the settlement of your estate.
Did You Know Where All Your Assets Are?
A scattered estate cay cause some assets to be left uncollected, undistributed, or lost. One client of ours suffered from dementia and it was only through diligent searching of his records (at great expense) that we found an annuity worth over $150,000!
Did You Put All Your Assets into Your Trust?
Remember, forgetting to fund a trust is one of the biggest estate planning mistakes. Do not forget about art, furniture, clothes, and other possessions. These may also be transferred into your trust using a bill of sale. Otherwise, these assets left outside the trust could be subject to probate. You should carefully consider your objectives for each type of asset.
Have You Updated Your Estate Plan?
Finishing your estate plan will feel really great, but you still are never really done! Each year, new laws and regulations are passed and family circumstances change. These things can affect your entire estate plan, so you have to review and update your estate plan with an attorney at least every five years. But you should review it every year. You may want to modify certain will or trust provisions, but do not go about this on your own, as that could have adverse legal affects.
The Astill Law Office has provided high quality legal services for over 30 years. We specialize in wills, trusts, estate planning, and asset protection. If you have any questions about creating a Trust, Will, or estate planning in general, contact The Astill Law Office at 801-438-8698.