Did you know that half of Americans do not have a Will? Most people think when they pass away their estate and assets automatically go to their family. This is not always true. Not having an Estate Plan can lead to heartache, litigation, and hefty costs. Here are some of the most common Estate Planning mistakes people make according to the National Law Review.
1. Not Having an Estate Plan
When a person dies without a Will in place, the door is open for the state to step in and decide how to distribute the estate and assets. A Will, just one part of an effective Estate Plan, spells out one’s wishes upon death for what are known as “Probate Assets.” Probate Assets include all property, real and personal, that is in the decedents name personally at the time of death. Other features of an Estate Plan are a Trust, Power of Attorney, Healthcare Proxy and Living Will. These legal documents give specific instructions should you die, become incapacitated, or in the case of a Trust, allow your assets to be held for a beneficiary while, in most cases, avoiding the long, painful and expensive probate process altogether.
2. Not Planning for the Unexpected
If you become seriously ill or not able to make decisions for yourself, your spouse or family members would have to go to court to have a guardian appointed that would act on your behalf. Estate Planning documents such as a Power of Attorney and Healthcare Proxy name a person that you choose to carry out your wishes and directives. A Living Will provides your instructions of what to do in the case of a dire medical condition when you’re not able to speak for yourself.
3. Not Having a Back-Up Plan
A Will, Trust, Power of Attorney, Healthcare Proxy and Living Will should all have an alternative Trustee, Executor, or agent (collectively referred to as a fiduciary) should the initial Fiduciary you chose is unable to carry out their duties. If none are named, a court would have to appoint a successor to the original Fiduciary. In most cases, well-drafted Estate Planning documents will provide for a mechanism to appoint a vacated fiduciary office without court involvement.
4. Not Updating After a Major Life Changing Event
Another Estate Planning mistake is when a divorce, separation, moving to a new state, or the birth of a child occurs. These events change everything as far as your Estate Plans are concerned. In these situations, the Estate Plan should be reviewed and updated to add or remove beneficiaries, or to change post-mortem distributions. An ex-spouse still named as a beneficiary in a Will is entitled to inherit assets owned by the predeceased spouse. Children under 18 are not allowed to inherit property directly. A guardian should be necessary to hold the property for that child, however, a thoughtfully drafted Trust will allow the trustee to maintain control over a child’s assets until that child reaches a certain age, which is determined by the Grantor of the Trust.
5. Not Funding a Revocable Trust
The biggest mistake that people with Revocable Trusts make is that they fail to fully fund the trust, defeating its purpose for those assets that are not transferred into the Trust. A Revocable Trust, also known as a Living Trust, places your assets in trust and then transfers those assets to your appointed beneficiaries when you pass away. This Trust avoids probate and since it does not become a public record, it ensures your privacy since probate is public. However, a living or revocable trust must be funded. This involves transferring your assets and properties from you to your trust. This is done three ways: Through a Deed, which transfers real property into the Trust; Bill of Sale, which transfers personal property into the Trust; Re-titling the accounts that you have with financial institutions.
6. Don’t worry about your assets in your Revocable Trust
In most cases, you would be the trustee of your Revocable Trust while you are alive. Your Trust would appoint successor or alternate trustees in the event that you either die or become incapacitated. The important things about a Revocable Trust are that: You continue to have complete control over your assets once they have been placed into your Revocable Trust; you avoid the necessity of filing a petition for probate for the assets that you fund the Trust with; allows an alternate person whom you trust to take over for you when you are unable to perform the duties of trustee; allows your assets to go to your loved ones seamlessly when you pass.
Don’t make these Estate Planning mistakes. Contact us at SKB Law and let us help you set up a complete Estate Plan to protect you and your family.