- Failure to Plan for Incapacity. This mistake can cause your family great stress and acrimony, and leave your finances in disarray. You should have a financial Durable Power Of Attorney, an Appointment of Health Care Representative and a Living Will. You should not solely rely on joint bank accounts with children to manage incapacity.
- Failure to Plan for Long-Term Care Expenses. If you can afford it, you should purchase and maintain a long-term care insurance policy. Long-term care costs pose a great threat to your financial future. If you are not financially able to pay for long-term care insurance, you should make sure you will qualify for Medicaid. Only those most fortunate with over $1,000,000 in liquid, non-retirement assets need not be concerned about long-term care expenses.
- Outdated Wills, Trusts and Beneficiary Designations. You should review your wills, Trusts and beneficiary designations at least every five years and whenever there is a major change in your family circumstances (e.g., onset of dementia, death of a parent, marriage, divorce, birth of first child, moving to another state) or financial circumstances (e.g. – purchase or sale of a business or real estate, theft by family members). Laws can change and people can change.
- Poor Choice of Agent, Trustee or Personal Representative. Appointing a family member or the child who lives closest is not always best. It is important to pick a person respected by other family members who has the time, ability, and willingness to serve. Often, appointing co-fiduciaries makes sense. In cases where members of the family seldom agree with each other, are scattered geographically, or the assets are complex, appointing a professional trustee may be best.
- Lack of Adequate Records. You should keep good records. If you don’t, it can lead to missed assets, unpaid bills, and extra work for your Executor or Trustee. It can also mean that your probate attorney has to spend more time on your estate which leads to greater expenses for your family.
- Overuse of Wills. Probate can be expensive. Your executor is required to file an Inventory of assets, and account for funds that came into, and went out of, the estate. For a married couple of modest means, other devices such as life insurance beneficiary designations, joint ownership, and payable on death arrangements can often avoid probate at considerably less expense than using a Will for those purposes. A Revocable Trust can also avoid probate while saving taxes and keeping assets in the family.
- Failing to Use Trusts to Keep Assets in the Family. Most people who have children and grandchildren want to keep their inheritance in the family. Yet, they often just give their property outright to children and grandchildren. It is simple and clean. But it also means that your child can spend it unwisely, his or her spouse could take it all in a divorce or at your child’s death, or creditors could seize it. Your child’s spouse could remarry and all of the inheritance you left to your child goes to the spouse’s new mate. With an outright distribution to your children, your grandchildren may never receive anything from your estate. By using a trust, you can control who receives it and when. You can protect it for your grandchildren.
- Failure to Communicate. Although you may wish to keep your estate plan confidential, disclosure is often wise. Named executors and trustees are more likely to accept the office and family disputes can be avoided or minimized by discussing your estate plan with your children.
- Inadequate Financial Planning. Estate planning involves more than the preparation of a will and trust. Cash flow is so important after someone dies. How will your heirs pay for the funeral, administration expenses, and estate or income taxes? You may own residential real estate or a retirement plan with designated beneficiaries. But the real estate cannot pay bills and the retirement plan distributions are subject to income taxes upon distribution. A small joint account with a trusted family member who knows the purpose of the account can help ease the early administration expenses of an estate. Life insurance can provide needed liquidity to pay larger administration expenses, court costs, and taxes.
- Using Attorneys with Little Experience in Estate Planning or Elder Law. Estate planning can be quite complex. It involves understanding estate and gift tax laws, income tax laws, probate procedure, financial planning, and long-term care planning. The strategies taken can lead to vastly different results. Seeing experienced estate planning attorneys with substantial experience can make a difference.
