As a former litigation attorney, I was reminded everyday on how improper estate planning can be extremely damaging and expensive for your loved ones and the family that you leave behind. Therefore, I have listed the following five mistakes to avoid when planning your estate.
- Writing Your Own Estate Plan and Not Hiring a Lawyer
This mistake should be the most obvious. No one should create an estate plan, Will, Trust, or otherwise, without at least speaking with a knowledgeable and experienced estate planning attorney. When you visit with an estate planning attorney, most will not charge you for the initial consultation, the estate planning attorney will be able to look at all of your financial assets, your family issues and circumstances, and will be able to provide a recommendation based upon his legal expertise on which estate planning strategy is best for your family. When you choose to write your estate plan yourself, you do not have the benefit of legal consultation and review by an estate planning attorney, and this is where mistakes and potential future litigation can occur.
- Only Creating a Last Will and Testament
A very common estate planning mistake is to only create a Last Will and Testament and no other estate planning documents. Although, a Will is very important and the cornerstone of every family’s estate plan, it is never enough to protect your assets while you are alive and provide a smooth transition for your loved ones when you are gone. It is very important for every family to have at the very least, a Will, a power of attorney, a health care power of attorney, and a living will. The later three documents are commonly referred to as the disability legal documents. Without these documents in place, your family would be put in the position of having to take you to court in order to have a guardian named over you to make your financial decisions, medical care decisions, and access medical records. In addition, every family should consider putting in place a revocable or an irrevocable living trust in order to avoid probate, reduce taxes, plan for children with special needs, and/or avoid nursing home poverty.
- Failing to Fund a Revocable Living Trust
There are many families that will create a revocable or irrevocable living trust for a number of reasons including: (1) avoiding taxes, (2) avoiding probate, (3) making things simple for their family, (4) planning for children with special needs, (5) avoiding nursing home poverty, (5) or even planning to protect their children’s inheritance from divorce. However, a common mistake that is made by families who set up a trust, regardless of what their reason for setting up the trust, is to fail to properly fund the trust. In order to have a trust work effectively, certain assets, referred to as probate assets, need to be transferred and retitled into the trust. For instance, real estate, certain investment and brokerage accounts, certificate of deposits, and mineral interests will need to be retitled. If you fail to properly retitle assets and fund the trust with these assets, then these probate assets that are in your own name will be required to go through a painful and lengthy probate court process. This would effectively ruin the point of why you set up a trust to begin with.
- Failing to Name a Successor Executor/Trustee/Attorney-in-Fact
A common mistake that many families make, and fail to realize is a mistake, is failing to name a successor or back up executor, trustee, and attorney-in-fact for your trust, Will, and disability legal documents. It is very important to have successor agents available and named in your estate planning documents. In the event that your agent predeceases you, is incapacitated, or is otherwise unable to serve, and there is no successor agent, your family will likely have to go to court, even if you have a probate avoidance trust, in order to have an executor/administrator/trustee/attorney-in-fact appointed to settle the estate and/or make those financial and health care decisions when you are unable to make those decisions on your behalf.
- Hiring the Least Expensive to Handle Your Estate Planning
Sometimes, as with any other product or service, there is temptation to purchase the product or service in the least expensive way possible. However, choosing the least expensive attorney to handle your estate planning needs could be the most expensive decision that you make for your family. There are a number of qualities that you should consider when hiring a law firm to handle your estate planning needs including: (1) does the law firm practice exclusively in the area of estate planning and probate administration; (2) serves clients for a fixed and reasonable cost; (3) works with a team of additional estate planning attorneys as part of a national law firm; (4) guarantees professional and courteous service as well as life time support; (5) and regularly speaks and writes about important estate planning topics.