What are five of the biggest estate planning mistakes you can make?
1. Not Doing Your Estate Planning
Not doing your estate planning is like working all spring to plant, water and weed your garden, and when your vegetables are ripe and ready to eat, you do nothing, and they rot on the vine.
You work so hard to protect your family and to build a nest egg. Why would you not protect it with estate planning?
Not having an estate plan means the state will choose your beneficiaries, a judge will choose who will raise your children, your home and your accounts will go through an expensive and complicated probate, and you will have no one authorized to pay your bills and make medical decisions for you if you can't.
Not doing your estate planning is not an inconsequential thing like not returning your Amazon package in time to get a refund, or forgetting to cancel your free trial of a streaming network.
Estate planning hits to the core of who you are. It's about protecting your family, yourself, and all you've worked for.
2. One and Done Estate Planning
One and done estate planning is when you do a simple will and you file it away in your desk drawer. Many decades later, when you pass away, your children find it, and it's completely out of date. No one named in your will is even alive except your first born, and your second and third child are not even mentioned. You left a mess.
For your estate plan to be effective, you need to update it from time to time. Your family and assets are not static, so your estate plan can't be static. Your estate plan needs to reflect your current life, not your past life. An outdated estate plan will not work.
3. Not Funding Your Living Trust
You won't avoid probate with a living trust unless you have funded, or transferred, your probatable assets to your trust. Assets that go through probate in California include real property worth more than $60,000 and bank accounts, investment accounts, and other assets worth more than $184,500. Make sure your home and your large bank and investment accounts are titled in the name of your trust, or your family will have to go through probate.
4. Not Naming Contingent Beneficiaries on Your Life Insurance and Retirement Plans
Most married people name their spouse as the primary beneficiary of life insurance policies and retirement plans. However, many fail to name a contingent beneficiary. If your spouse dies and you didn't name a contingent beneficiary, and then you die, your life insurance or retirement plans may have to go through probate. Always name a contingent beneficiary. Often the best choice will be to name your children or your living trust.
5. Not Reviewing Your Estate Plan with an Estate Planning Attorney
Back in the day, I could change the oil and make basic repairs to my car. Today, it's a challenge to open the hood. Cars are more complicated than they used to be. When my car needs maintenance, I now take it to the shop.
Life is more complicated than it used to be. So is estate planning. Maybe you have a living trust, pour-over will, durable power of attorney, advance health care directive and HIPAA that you did yourself many years ago on LegalZoom or had drawn up by your college roommate who is a personal injury attorney. Well, something is better than nothing. However, just like I wouldn't trust myself or my friend who is not an auto mechanic to fix my car, don't trust yourself or your friend who is not an estate planning attorney to draft your estate plan.
We are often asked to help a successor trustee administer the trust of a loved one who has passed away. A surprising number of the trusts we review in a trust administration are so poorly written that it is difficult to determine the grantor's intent. This makes our job and the trustee's job very difficult. And in many cases, it results in at best, confusion for the beneficiaries, and at worst, a lawsuit to ask a judge to interpret the trust terms.
If you are going to do your estate planning, which you should - see #1 above, you need to do it right, and make sure your intentions are clearly spelled out in terms that can be followed. A good estate plan should be clear, unambiguous, and straight-forward to administer.