Mistakes are costly in estate planning.
You have created an estate plan.
You managed to do it all by yourself.
You feel good.
According to a recent Dedham Wicked Local article titled “Five big estate planning ‘don’ts,’” you could have a false sense of security if you are not an experienced estate planning attorney.
Estate planning blunders are common when people attempt to take estate planning law into their own hands.
What are common estate planning mistakes?
Selecting minors as beneficiaries.
You have minor children or grandchildren.
You want them to inherit.
You simply name them as heirs in your will or as beneficiaries to a policy.
Do not do this.
Minors cannot own assets.
The minor will not be named as an owner.
Instead, a conservator will be named by the court to receive the inheritance for the child.
This conservator must hold the asset and use it for the benefit of the child until the child comes of age, which is age 18 in Kansas and Missouri.
The conservator must file reports and account for how the funds were used for the child each year.
This is costly in both time and money.
How might you fix this?
Create a trust to benefit the child.
Drafting a will yourself.
Yes, there are templates available online.
Using one of these template more often than not invites disaster.
Oftentimes, the templates do not take into account laws unique to each state.
For example, if you execute it improperly, it will be invalid.
In the end, you will lose more money from your estate than you would have saved from seeing an experienced estate planning attorney.
Naming joint owners to bank accounts.
If you name a child to a bank account as an owner, your funds could be subject to their personal issues.
If they are poor at handling funds or are untrustworthy, they could take your money.
If they are divorced, sued, or in debt, your money could be lost to an ex-spouse or creditors.
It can also cause confusion in terms of where the money passes when you die.
Two possible solutions would be to create a trust or draft powers of attorney so your financial affairs can be handled should you become incapacitated.
Not funding revocable living trusts.
Creating a revocable living trust is just one step.
In terms of probate avoidance, it does not benefit you one whit if there is nothing in the trust.
You must change ownership of assets to the trust or name the trust as a beneficiary for certain assets.
When this is done, these assets will bypass probate proceedings.
You need to make these arrangements before you die or the assets will become part of your probate estate.
Selecting your children as co-fiduciaries.
Do your children argue?
If yes, you probably do not need all of them making your financial or health care decisions together.
If you do, one of two things could happen.
They could be driven to irreconcilable disagreements and division.
The other result is nothing would get done.
Neither is desirable.
What should you do instead?
Evaluate who among your loved ones would best be able to carry out your wishes on your behalf both efficiently and effectively.
Finally, once you have your affairs in order with the help of an experienced estate planning attorney, you are not necessarily done.
You should review your estate plan every few years or after major life changes to ensure that it still meets your goals and situation.
Reference: Dedham Wicked Local (May 17, 2019) “Five big estate planning ‘don’ts’”