From time to time, it’s good to review your estate plan. Having a complete, up-to-date estate plan is an important part of ensuring your wishes are carried out exactly how you intend. Here are four common estate planning mistakes to avoid when planning for your estate.
1. Not Having a Plan.
Each individual state has its own predetermined set of laws for distributing the property of someone who dies without an estate plan. Generally speaking, the state gains control of the division of the deceased’s assets. They usually leave a percentage of the assets to family members. It is common for the surviving spouse and children to receive an equal share. Sometimes this is fine and presents no conflict of interest, but in certain circumstances it can leave the surviving spouse with very little to live on. If the children are minors, the court will control their inheritances until they reach legal age (usually 18), at which time they will receive the full amount.
2. Relying on Joint Ownership.
Many people add an adult son or daughter to the title of their assets to avoid probate. This seems like a smart move, but it can actually create all kinds of problems. When you add a co-owner, you lose control. Jointly-owned assets are now exposed to the co-owner’s problems including creditors, divorce, and possible misuse. Your co-owner must also sign off on any business transaction associated with that asset. There could also be problems associated with gift and/or income tax, or with an equal division of your assets amongst your children.
3. Not Planning for Incapacity.
If someone does not plan ahead and cannot conduct business due to mental or physical incapacity, only a court appointee can sign for this person. Even if a valid will exists, it only goes into effect after the person has passed on. The court, not the family, usually stays involved until the person recovers or dies and will control how their assets are used to provide for their care. The process is public and can become expensive, embarrassing, time consuming and difficult to end.
A living trust is often preferred for incapacity planning, as power of attorney can be a risky plan. With a trust, the person(s) you choose to act for you can do so without court interference, and can be held accountable if they are irresponsible.
4. Not Keeping Your Plan Up to Date.
Every estate plan is based on a variety of particulars that are specific to the time it was created. Life changes over time, sometimes drastically, and your plan needs to change with it. You should review your plan every couple of years and make sure it still reflects your wishes. We will let you know when a tax law change might affect your plan, but you need to let us know about other personal changes that could affect it.
If you need help with your estate planning, please contact our office. We can help you create the plan you desire or update an existing plan. Give us a call at 916-932-7416 and we will be happy to help by answering any questions you may have.