While it’s human nature to avoid thinking about death and impairment, failing to properly plan your estate exposes loved ones to myriad troubles including court battles, assets getting lost and outcomes directly against your wishes.
Even those leaning on standard wills encounter limitations and oversights undermining their best intentions. The worst part is that these mistakes won’t be discovered until you are gone – and the very people you were trying to protect will be the ones stuck cleaning up the mess you created just to save a few bucks.
Estate planning is definitely not a one-size-fits-all endeavor. Even if you think your particular situation is simple, that turns out to almost never be the case. To demonstrate just how complicated estate planning can be, here are five of the most common estate planning mistakes, starting with the worst blunder of all: failing to create an estate plan.
Doing nothing: Without directives in place, the state often awards possessions to distant relatives rather than committed partners who assumed they would provide mutual care. Is it fair that a nephew you barely know could claim a house where you and your partner lived happily for decades?
Relying exclusively on wills: Lots of people, particularly older folks, believe that a will is the only estate planning tool they need. Wills still undergo public, expensive probate proceedings and apply only after you pass, leaving gaps in managing your affairs if you become incapacitated. They also neglect certain jointly owned or beneficiary designated assets and supply minimal guidance on inheritance management.
Creating unfunded trusts: While trusts avoid probate, simply making one doesn’t guarantee your wishes get honored. An unfunded trust is a trust that exists, but that doesn’t hold any of your assets because you didn’t retitle them properly or because you acquired new assets after creating your trust. If any assets are not properly funded, the trust won’t work, and your family will have to go to court in order to take ownership of that property. When you acquire new assets after your trust is created, you must make sure those assets are properly funded into your trust as well.
Letting assets go undocumented: Even if you’ve properly funded your assets into your trust, your estate plan will be worthless if your heirs don’t know what you have or where to find it. Failing to list all your accounts, property and even online life makes it impossible for anyone to find your assets if you can’t manage it anymore. Billions – yes BILLIONS – in assets are lost from insufficient documentation!
Neglecting regular legal reviews/updates: Laws and relationships constantly change such that wills/trusts created even a few years ago may now feature obsolete directives or omit new assets. Annual reviews help confirm your plan still reflects your situation and goals.
Next week, in Part 2, we’ll wrap up our list of the 10 most common estate-planning mistakes.
This article is provided by your local estate planning attorney, Corina Colan.
The Law Office of Corina I. Colan / (909) 265-3315 / www.colanlegal.com
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