Common Estate Planning Mistakes and How to Avoid Them

Common Estate Planning Mistakes
Please Share!
Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on email
Email
Even those with the best of intentions can fall into the trap of estate planning misinformation. Estate planning attorneys frequently hear rumors and ill advice disguised as facts.

Every family has one: the brother-in-law or aunt who knows everything about, well, everything. When the information is wrong, expensive problems can be created, especially when it comes to estate planning. Estate planning attorneys devote a good deal of time to education to help prevent unnecessary and costly mistakes, as described in the article “Misinformation, poor assumptions result in major planning mistakes” from The News-Enterprise.

The most common is the idea of a “simple” estate plan. What does “simple” mean? For most people, the idea of “simple” is appealing—they don’t want to deal with long and complicated documents with legal phrases they don’t understand. However, those complex phrases are necessary if the estate plan protects your interests and loved ones.

Another mistake is thinking an estate plan is a one-and-done affair. Just as people’s lives and fortunes change over time, so should their estate plans. An estate plan for a young family with small children won’t work for a mature couple with grown children and significant savings.

The change also comes to family dynamics. During your teen years, the cousin who was like a sister may not be as close in values or geography when you both have elementary school children. Do you still want her to be your child’s guardian? An updated estate plan takes into account the changing relationships within the family, as well as the changing members of the family. A beloved brother-in-law isn’t so beloved if he divorces your favorite sister. When families change, estate plans need to be updated.

Here is a colossal mistake rarely articulated: somehow, not thinking about death or incapacity might prevent either event from happening. We know that death is inevitable, and incapacity is statistically probable. Planning for both events in no way increases or decreases their likelihood of occurring. What planning does, is provide peace of mind in knowing you have prepared for both events.

No one wants to be in a nursing home but telling loved ones you want to remain at home “no matter what happens” is not a plan for the future. It is devastating to move a loved one into a nursing home. However, people with medical needs need to be there to receive proper care and treatment. Planning for the possibility is better than a family making arrangements, financial and otherwise, on an emergency basis.

Do you remember that all-knowing family member described at the start of this article? Their advice, however well-intentioned, can be disastrous. Alternatives to estate planning take many shapes: putting the house in the adult child’s name or adding the adult child’s name to the parent’s investment accounts. If the beneficiary has a future tax liability, debt, or divorce, the parent’s assets are there for the taking.

Correctly done, with the guidance of an experienced estate planning attorney, your estate plan protects you and those you love, as well as the assets you’ve gained over a lifetime. Don’t fall for the idea of “simple” or back-door alternatives. Formalize your goals, so your loved ones will follow your plans and wishes.

Reference: The News-Enterprise (Aug. 24, 2021) “Misinformation, poor assumptions result in major planning mistakes.”