A Dozen Mistakes to Avoid in Estate Planning

# 1 Mistake: Failing to Address Health Care Decisions

  • Not addressing health care decisions can create conflict among family, guilt, no directions, cause delay, and unexpected costs.
  • An Advanced Directive can identify the decision-makers you want, can provide for end of life directives, and makes clear statements of intent to your loved ones.

#2 Mistake: No Plan to Control Financial & Property Matters During Incapacity

  • Without appropriate legal documents to manage your assets during incapacity, a court supervised “conservatorship” is probably inescapable.
  • No plan creates time consuming problems that are expensive, cumbersome, emotionally trying, and is public record.
  • Avoid a conservatorship during your incapacity by establishing a Trust.  A trust allows you to appoint a trustee to manage your financial affairs and thus can avoid the need for an appointment of a conservator.
  • Avoid a conservatorship with a Durable Power of Attorney.  An individual can delegate the agent the power to make financial transactions on their behalf if they are unable to do so themselves. 
  • Powers of Attorney should be well-thought out in order to be effective, productive, and achieve the principal’s overall objectives.
  • Provisions that are often left out without careful drafting are:
    • The power to sell your home
    • Who will care for pets?
    • The power to fund trusts
    • The power regarding U.S. mail.

#3 Mistake: No Wealth Transfer Strategy

  • A Wealth Transfer Plan is tailored to the assets you own.
  • It accounts for your unique family situation and is designed to streamline transfer of your assets quickly and cost effectively.
  • A Living Trust holds and passes assets without probate, provides for asset management, and deals with disability and death. 

#4 Mistake: Failure to Understand & Plan for Death Taxes

  • You may be surprised how big your estate is.  It includes your home, retirement plans, life insurance, real estate, investment accounts, autos, boats, RVs, furnishings, collections, and personal effects.
  • With appropriate tax planning in your estate plan, you can avoid losing money planned for loved ones to the federal government at your death.

#5 Mistake: Thinking Children – Minor and Adult – Don’t Need Inheritance Protection

  • What if your child becomes instantly “rich” at age 18? Or suffers a divorce?  Or experiences creditor problems? Or gets sued?
  • A Trust can protect your child’s inheritance.  The adult child becomes co-trustee or eventually trustee of their trust.  The child has significant access to income and principal and there are few strings attached.
  • The benefit of a children’s trust is to protect inheritance from future divorces, lawsuits, bankruptcy, personal injury claims, the IRS, etc.  You can also protect your child from becoming a spendthrift.

#6 Mistake: Failing to Transfer Values

  • Traditional estate plans mainly focus on transferring assets, reducing taxes, and administration costs.
  • A comprehensive estate plan adds ethical wills, incentive trusts, and involves children in the process.

#7 Mistake: Not Preserving Tax Deferral Benefits of Retirement Plans

  • Most of your retirement account could be subject to immediate taxation on death.
  • The longer your beneficiaries can keep funds in an IRA after death, the more wealth they can create.
  • Find out if your IRA can be stretched to prolong ownership.
  • An IRA Legacy Trust can protect and increase wealth by keeping funds in a tax-protected IRA as long as possible.
  • There is a huge loss when your IRA is cashed out early and spent.
  • An IRA Legacy Trust is revocable, established now by the IRA owner, is the beneficiary of the IRA at Owner’s death, and is separate from your Living Trust.

#8 Mistake: Failing to Organize and Consolidate

  • Without organization estate administration can cause delays and increased costs.
  • There may be a lack of communication, inability to locate assets, redundant accounts, or no central repository.
  • Be organized with an estate planning portfolio repository, consolidate your accounts, had have emergency document access.

#9 Mistake: In Second Marriages, Failing to Protect Your Spouse, and Your Kids

  • Problems with leaving your money to your surviving spouse can be a problem if that spouse is a spendthrift, which effectively disinherits your children, or your spouse is victimized by a gold-digger decimating your estate.
  • There are solutions with proper estate planning.  A trust can pass the inheritance to your spouse and your children instead of your spouse’s new spouse or your son-in-law or daughter-in-law. 
  • A trust can provide income and principal to your spouse for life in accordance with their needs.  Then income goes to your children per your choice.

#10 Mistake: Failing to Plan for Tangible Personal Property

  • The most common fights after your death is regarding your tangible personal property, sentimental items, reminders, photos, jewelry, artwork, collectibles
  • A solution is to create clear communication and a clearly articulated process for your property.

#11 Mistake: Access to Medical Records

  • Don’t fail to plan for HIPAA, which locks down private health care information. 
  • Medical personnel face stiff penalties and are reluctant to provide family members access. 
  • A special HIPPA authorization ensures access to medical information.

#12 Mistake: Believing Estate Planning is a “One-Time Event”

  • Estate planning is a lifetime process.
  • There may be personal and legal changes that occur, requiring updates to your plan.
  • Lasting relationships are key, and making sure your plan grows with you.

We offer complete estate planning services with fee ranges to suit your individual needs. Find out today how we can help you meet your goals.  Contact attorney Feliz Martone to begin your unique plan.