The following is a brief list of common estate planning mistakes
that the client should keep in mind when engaging in any form of estate
planning.
1 - Insufficient plan for controlling financial and property matters during incapacity
Far
too little time is spent in addressing how most estates will be managed
for the benefit of the client while he or she is incapacitated. Most
estate plans are focused primarily on how assets will be divided among
heirs. A good estate plan should spend an equal amount of time
addressing how you should be cared for and how your estate should be
managed if you are no longer able to manage it on your own. This aspect
of planning can be far more beneficial than the "who gets what"
provisions.
2 - Thinking children (minors and adults) don't need inheritance protection
Most
people assume that giving a lump sum of money to their heirs is the
best approach, possibly because it is free of "red tape" or other
entanglements. However, have you ever really thought what an 18-year old
is likely to do with a substantial sum of money? Wouldn't it be nice to
be able to protect your child's inheritance from a divorcing spouse or
even creditors? It is possible and, in fact, is one of the best benefits
you can provide your children, with few strings attached. Employing a
good trust plan can allow your child to become his own trustee of his
share, at times and upon such conditions as you feel are most
appropriate, providing almost unlimited access to the inheritance, but
also allowing the child to add an independent co-trustee to his/her
share of the estate, if problems should arise. The ensures that the
money will be considered part of your estate still, off limits to
creditors or divorcing spouses.
3 - Failure to adequately protect both spouse and children in blended family relationships
Unfortunately,
I am too frequently approached by someone who is having difficulty
trying to ascertain what has happened with a parent's estate, because a
surviving spouse from a second (or third, etc.) marriage, or a child of
that subsequent spouse is not sharing information, providing proper
accountings, or has outright disappeared with the goods. No matter how
much you love and trust your new spouse, you have to remember that
he/she is not the only person that will be involved in this equation and
the prospect of money oftentimes causes good people to do very
self-serving things. Use a good trust plan and make sure that adequate
remarriage restrictions and other protections exist to ensure that
everyone will get what you have intended.
4 - Failure to "fund" the trust
I
cannot over-emphasize how big an issue this is. I see this problem time
and time again. People go to a particular attorney (most likely one who
does not specialize in estate planning), with the primary purpose of
saving money on a trust plan. What they typically get is a packet of
papers and little else. This packet goes home and gets placed on a shelf
and is quickly forgotten. Then, when it's time to administer the trust,
the successor trustee finds that there is no property in the trust and a
probate must be initiated to transfer title of all the assets to the
trust - one of the very things we were trying to avoid by using trust
planning in the first place! It is critical that all assets are properly
coordinated with your trust, if it is going to be effective when you
need it to be. Far too many attorneys either skip this critically
important step or leave it to the unwary client, with far too little
emphasis or education.
5 - Thinking estate planning is an "event", instead of a "PROCESS"
It
is imperative that estate planning be thought of as a process and not a
one-time event. Laws will change, your assets will change over time
(hopefully in an upwards direction) and your personal relationships will
change. All of these things must be accounted for in your estate plan.
The documents you create today will remain fairly static, even though
your life's path will be rather dynamic. Thus, your documents need to be
reviewed on a regular basis to ensure that they still work for you in
the manner you desire. I recommend to clients that they review at least
once every three years. This seems to be about the time it takes on
average for something to need to be addressed, whether it's a change in
property ownership, a new account having been opened, a death in the
family or a change in the law affecting the validity of the plan. Don't
underestimate the need for a regular review.
