Six Estate Planning Mistakes to Avoid
Estate Planning Mistakes to Avoid – Today’s guest blog is by Albert Moore, Attorney at Law. The opinions expressed by the author in this and all guest blogs are not necessarily those of Attorney Mark E. Hall.
Estate Planning Mistakes to Avoid
Not every estate plan is the same, but some general rules apply to all. The documentation of estate planning varies according to size, value, and ownership. Despite having contrasting features, the stakeholders of every estate tend to make the same mistakes. The root cause is the lack of awareness and coordination with the planner.
Avoid making these 5 major mistakes to secure the interests of your property and beneficiaries:
- Expecting the Planner to Handle Everything
Many people hire an estate planner and assume that everything will be taken care of on its own. Despite being mature and literate, they will sign documents without bothering to read or even skim through them. They may not understand some parts of the legal language, but they should at least make an effort to understand the fundamentals.
The estate planner provides the necessary material to the client and expects that he/she will follow through. In reality, the client has no idea what to do after wrapping up the meeting, and that results in failure to comply with the clauses of the plan.
- Ignoring the Powers of Attorney
Powers of attorney are an essential element to every estate plan. Having two is the bare minimum: one for financial matters, and the second as a medical directive. Many people do not care for fulfilling the basic requirements and have no power of attorney to represent in times of need.
Any person may end up with a terminal illness or permanent disability. When such a situation arises, other particulars of your estate plan are useless. Some people who possess the powers of attorney fall behind in reviewing or updating them; conflicts arise due to the absence of appropriate details.
- Overestimating the Will
The will you write has weightage, but it cannot ultimately decide who will inherit your assets. Many people think that their will alone can dictate the distribution of their money, valuables, and property. Although the will has emotional value, it does possess practical power on its own.
Each of your assets has a separate beneficiary designation form, which determines the rightful successor. The misunderstanding is widespread and has been a massive headache for many attorneys. People change their will when they want to replace the previous inheritors and hence are supposed to update the beneficiary designations in order to make that happen.
When a person does not make changes to the beneficiary designations, the assets may go to unintended recipients, such as an ex-spouse. This can also result in the exclusion of newer family members that were only mentioned in the latest will.
- Misconceptions about Trust Funding
After the lawyer prepares the trust agreement and all stakeholders have signed it, the trust needs funding. Legal title to assets is transferred to the trust, which is a rather simple procedure. Complications arise with real estate, as the deed needs to be changed for representing the trust as the owner of accounts and registrations.
Many people omit these obligations and the money they spent on trust documents goes to waste. They fail to recover the financial benefits of the trust and assets fall under probate.
- Not updating Plan and Asset Ownership
Similar to beneficiary designations, asset ownership, and the entire estate plan needs reviewing and updates. You need to coordinate with your planner on a regular basis, especially when there has been a significant change to your financials or family. Changes in law or personal objectives for the future are also valid reasons for altering legal documentation.
Change in net worth, income, and residency can have a huge impact on your original estate plan. In addition, births, deaths, marriages, and divorces within the family shall provide a motive for adjustments.