What NOT To Do When Estate Planning
The topic of estate planning has garnered a reputation of being something only the super wealthy or elderly need. So, it’s understandable why most people don’t know how estate planning is relevant to their everyday lives or whether they actually even need an estate plan.
Estate plans include many different types of documents such as living wills, advance directives, and special needs trusts—documents that are not only important, but often a good idea to set up early in life. An estate plan is necessary to name the beneficiaries who will receive your property after your death. If your estate has substantial value, a good estate plan can assist in preserving your property for your heirs and reducing or eliminating federal estate taxes on your death. The estate plan should also designate the person or persons who are to manage your financial affairs and who will make health care decisions in the event that you become incapacitated.
Whether you are just getting started with your estate plan, or if you are in the process of updating existing estate documents, one of the biggest things you will want to avoid is believing any of the common misconceptions or myths about estate planning. These myths describe exactly what NOT to do when estate planning.
You may have read about these myths on the internet or maybe you heard it from well-meaning, but uninformed friends or family. You’re probably familiar with some of these myths, such as estate planning is only for the wealthy, that trusts are overly complicated, or that the do-it-yourself estate planning route will save you money. In fact, we’ve received so many questions about these estate planning myths that we wrote a previous blog about it, and we encourage you to read it to get a better understanding on this type of estate planning misinformation. Why? Because if you follow any one of these estate planning myths, it can result in unintentional and negative consequences for you, your family, and your estate. These consequences can include lengthy court battles, family feuds, lost estate value, costly estate taxes, and/or court ordered guardianships.
Now that you know what NOT to do when estate planning (don’t believe the myths and misconceptions), what should you do to get started? The best thing you can do is work with an estate planning lawyer who can help guide you through the whole process and who can thoroughly explain why crafting an estate plan that suits your specific needs is so important.
Why Estate Planning Is Important
Estate planning really is for everyone. If you have any assets, even minimal assets, you should really take the time to work with an experienced estate planning attorney and make plans for your estate. A skilled and experienced attorney can help you to draft a Will or Trust that allows you to control how your assets are disbursed to your beneficiaries after your death. A lawyer can also help you explore other estate planning tools in order to distribute your estate in the best manner possible for your individual needs. In addition, a lawyer can help you by drafting Powers of Attorney to ensure that your desires regarding your healthcare, financial, and other personal decisions are respected and upheld in the event that you become incapacitated. Quality estate planning can help individuals provide for their future and their family’s future in an efficient and sustainable manner.
Estate planning and end of life planning are about taking control of your situation and protecting your family’s financial future. Death and long-term care might be hard to fathom right now, but we can’t put off planning out of fear of the unknown or because the topic is uncomfortable. Remember, estate planning is about obtaining peace of mind by knowing that your life goals are properly set out to protect you and your family.
What To Avoid When Estate Planning
While this list is not exhaustive, here are seven common mistakes to avoid when estate planning:
- Not having an estate plan at all– If you don’t have an estate plan, most states have one for you, and it may not be what you want! I don’t know many people who would want their state legislature to draft their estate plan for them, but that is exactly what you get if you don’t create your own estate plan.
- Sloppy drafting– One common example of sloppy drafting is not accounting for all heirs. For example, John has 2 kids. He creates documents leaving his entire estate to Child #1 and Child #2 only. He later has an additional child but fails to update his estate plan before he dies unexpectantly. Regardless of John’s intent, his sloppy drafting has now excluded Child #3 from his estate. A properly drafted estate plan can be written to include language that accounts for all heirs, even those not born yet.
- Do-It-Yourself estate plans– Even a simple mistake can result in a contested or invalid estate plan, which would offset any cost-savings in trying to do-it-yourself. The do-it-yourself route should also be avoided if you have a significant estate or a complex life situation (Ex: divorces or blended families).
- Not knowing your options– There are various estate planning tools available depending on your individual needs. Your attorney can help explain all available options and draft a plan that works for your specific situation.
- Not updating your documents– It’s important to review your estate plan documents every few years to account for any life changes (divorce, remarriage, death of a beneficiary, etc.) and make any necessary changes.
- Failing to fund your trust– If you have a living trust, be sure to fund it with your assets by changing record title or beneficiary designations as instructed by your attorney or hire an attorney that offers this as an option in their legal services.
- Not telling others what your plans are– One of the most important elements of estate planning is discussing your wishes with your loved ones. Letting your family and close friends know of your asset distribution plans and personal health choices can help prevent any potential misunderstandings. Talk to your loved ones and let them know what your plans and wishes are—and where your documents are located.
How A Lawyer Can Help Avoid Major Mistakes
The process of estate planning helps people to protect their finances, estates, and dependents in the event of their incapacitation or death. This includes drafting a will, determining estate taxes, and picking a personal representative (“Executor”) of the estate. It also means setting a longer-lasting power of attorney (POA) and much more.
If your intent in your documents is unclear, you are inviting probate litigation or contests to your estate. If there are any ambiguities, allegations of coercion or undue influence, omitted heirs, or if provisions are defective and unenforceable, your entire estate plan can fail. A good lawyer will have thorough knowledge of state and federal laws and will know how to properly draft your estate documents to clearly state your intentions and to avoid any major mistakes.
A skilled estate planning lawyer can help avoid major mistakes by:
- Advising on legal options- Laws are constantly updated, and if you’re planning your own estate you might miss a new law that could negatively impact your estate plan. A good estate planning attorney will be up to date on the law and will know of any changes that may affect your estate plan. Your attorney will also be able to advise you on the best estate planning tools to fit your specific needs and life circumstances.
- Sorting out complex family or financial situations- Your attorney is a neutral third-party and will truly listen to your needs and offer advice when needed. For example, an estate planning lawyer can help advise you on who would be the best person to carry out your healthcare wishes. Oftentimes, we choose an immediate family member when that role might really be better suited to someone who’s more removed from the situation. An attorney can act as a neutral third-party to guide you on who might be best to serve in this role.
- Drafting your documents- Your attorney can prepare and update documents on your behalf and make sure that those documents comply with all applicable laws.
- Filing your probate paperwork- If probate is required, your attorney can make sure any necessary paperwork is properly and timely filed with the court.
Your estate, even if it is modest, still represents financial security to your spouse and children. Use a competent estate planning attorney to make sure that your estate plan and any changes are properly drafted.
When it comes to estate planning, experience with the law matters. Contact Brown & Hobkirk, PLLC today to schedule your consultation with a qualified and experienced estate planning attorney. We are happy to see you in one of our conveniently located offices in Scottsdale, Phoenix, Chandler, or Tucson.
Robert Hobkirk is a partner at the law office of Brown & Hobkirk, PLLC. He represents clients in legal matters involving trusts and estates, wills, probate law, and estate litigation, among other areas.