Advisor Connections Newsletter™
September 2, 2015
10 Estate Planning Mistakes to Avoid
10 Estate planning mistakes to avoid
There is no time like the present to make certain that a client's estate planning is in order. Here are ten common estate planning mistakes to avoid.
1. Having No Plan
According to the American Bar Association, over 60% of the adult population does not have even a simple will. By taking no action, individuals risk leaving their loved ones with significant headaches after they are gone. The estate planning process may seem overwhelming, but it is likely much simpler than clients think. Getting their affairs in order will not only give clients peace of mind, but will ensure that they leave a positive legacy to their loved ones.
2. Disregarding Asset Ownership
Having a will or trust in place is a great starting point, but documents alone are not enough. It is important to make certain that any beneficiary or joint ownership designations are consistent with the instructions in a client's will or trust. Remember: title trumps the documents. For example, the will may provide that all assets are to be divided equally among three children. But if the client added one of the children to all of their cash and investment accounts as a joint owner, the survivorship feature of joint ownership will usually override the instructions in the will. This may unintentionally disinherit children who were not named as account owners.
3. Outdated Documents
Change is the one constant in life we can always count on. Estate planning documents need to keep up with changes in the family and finances as well as changes in the law. Legal documents should be reviewed at least once every two years to make certain they are current with ever-changing tax laws.
4. Not Making a List of Financial Assets
Nothing is more time consuming or frustrating for a loved one than trying to reconstruct a person’s financial life. Having a detailed and current listing of all financial holdings will save countless hours of time (and money) after a client is gone. Individuals should include account numbers, approximate account balances, and contact information for the institution that holds the asset on their behalf. They must keep the list in a safe place, and make sure a responsible person knows where it is!
5. Not Considering a Prepaid Funeral Plan
By prepaying for a funeral, loved ones will not have to worry about finding financial resources during a difficult time. Additionally, the funds paid to the funeral home during lifetime are not counted in qualifying for Medicaid. Clients should be sure to ask a funeral home director whether their prepaid funeral plans are transferable in case they move, or should the funeral home no longer be in business.
6. Not Sharing Your Plan
Although it may not be the most uplifting of conversations, taking a few minutes to review estate planning documents with family and other loved ones will greatly reduce the likelihood of a disgruntled beneficiary after the client is gone. It also helps to ensure that wishes will be carried out should the client become mentally disabled.
7. Giving Power Without Instructions
Legal documents give people power to act but rarely do they provide any guidance on how to use that power. Clients should be sure to talk with loved ones about their wishes for medical care as well about how they would want to be taken care of if they were not able to care for themselves. Not only will this help to ensure that their wishes are followed, but it will also give their loved ones peace of mind knowing the decisions they are making reflect what they would have wanted.
8. Failing to Properly Store Documents
Make sure loved ones know where legal documents are stored. In an emergency, there is rarely time or energy to conduct a scavenger hunt for a health care power of attorney, living will, or other important legal documents. In additional, clients must be sure loved ones can get to those documents if they are stored in a safe deposit box or home safe. Clients should consider providing loved ones with copies of their legal documents in advance of when they are needed.
9. DIY Planning
Having clients attempt to plan their own estate is not recommended. Although there are a number of software applications and legal document kits sold at office supply stores, as well as websites such as Legal zoom, these documents rarely meet the requirements to be legally binding, despite their claims. Since we are talking about every financial asset a client owns, the stakes are high. Unfortunately, mistakes in planning are usually not found until after a loved one dies and it is too late to correct them.
10. Choosing the Wrong Helpers
Naming executors, health care agents, power of attorney agents, trustees, and guardians should only be done after careful consideration. Clients should avoid the mistake of naming the oldest child simply because they were born first. Instead, they should consider factors such as organizational and financial skills, ability to communicate effectively with other family members, and personal availability when making these important decisions.
Clients should be sure to seek professional assistance to address any questions they may have pertaining to their family or planning situation.
Scott A. Williams has been recognized by Avvo.com as Supurb rated and a Clients' Choice estate planning attorney, as seen below:
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