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Estate Plan: The Biggest Mistakes to Avoid

Mistakes to avoid in an Estate Plan

An estate plan is not something most people want to spend time on when thinking about the inevitable—our own mortality. If you don’t, however, you may be leaving a mess for your loved ones. It is not enough to just “make a plan.” It is important to make an estate plan that meets your objectives and then to follow through or update your plan as your life changes.

Over the years, we’ve seen estate plans fail- either by not achieving the client’s objective or- even worse- resulting in the exact opposite of what the client intended. If you want your estate plan to work as planned, you should avoid the following mistakes:

1. The disadvantages of probate in an estate plan.

Probate takes about a year, can be expensive, and is public. Don’t assume that because you have a will, your estate will avoid probate. Wills must be probated. All assets owned by a decedent in the decedent’s individual name must go through probate unless there is a beneficiary designation (IRA’s life insurance, certain bank accounts, etc.)

2. Creating a trust but not funding it.

This is the most common mistake we see. A trust works to avoid probate because assets are titled to the trustees (an individual can be their own trustee) not to the individual. Then, when the individual dies, a successor trustee takes over title and control of the trust for the benefit of the named beneficiaries- in effect, a substitute will. If all assets are properly titled to the trustee, there is no need for probate. The mistake occurs when a client executes his or her trust but then fails to follow through with re-titling the assets. The result is that the assets must go through probate despite the existence of a trust. We are happy to help clients properly fund their trusts to makes sure their estates enjoy the real benefits of a trust

3. Creating an estate plan and then not reviewing it.

An estate plan that would have worked when you were 30 may be completely inappropriate at 60. Designated Successor Trustees or named executors may have died or become incapacitated or just no longer the person you would want taking care of your estate. Beneficiaries’ life situations may have drastically changed: children will have grown and become more or less able to handle the assets, marriages have come and gone, etc. Tax laws may have changed and trust language that would have saved estate tax now only place a surviving spouse without direct access to the assets. If your plan is more than ten years old, it is very important that plan language be reviewed for this issue.

4. Relying on an Estate Plan Internet form.

There are good estate plan forms on the Internet and there are bad forms. Even good forms can be very bad for the client if the forms are not carefully tailored for the client and appropriate for the client’s situation. A Google search is not quite the same as a law degree and years of experience.

5. Not understanding that an estate plan should benefit the client while the client is still living.

A good estate plan includes documents such as a Durable Power of Attorney for Financial Affairs, A Durable Power of Attorney for Healthcare and a HIPAA Authorization in case of sickness or incapacity.

These are only a few of the possible mistakes that you want to avoid. We would be happy to help review your estate plan at no charge for the initial consultation. If any of these mistakes (or others) are present in your estate plan, we can fix them.

About the Author

Dwight Sowerby