Common Estate Planning Mistakes

You have decided you need to think about your estate planning.  You want to avoid making mistakes.  Of course, the BIGGEST mistake is to not have any estate planning in place. 

To help you feel more confident about your estate planning, here are some thoughts to consider:

  • Who will be your fiduciary – your executor, your agent under a power of attorney or health care directive, a trustee if you create a trust.  Who is best suited for this position?  Does the same person have to act for all?  While consistency is helpful, you must consider the decisions to be made.  The person who would be best for financial purposes may not be the best choice for your health care agent.  You should select individuals best suited for the duties and responsibilities they may have to carry out. 
  • Tax laws are ever changing as are personal circumstances.  While your documents that are several years old may be sufficient in some regards, they may be deficient in other regards.  Older Powers of Attorneys may not contain HIPAA language.  Older documents may not address digital assets.  Your beneficiaries may have had a life change – divorce, disability, etc.  If in doubt, have your documents reviewed to determine if they need to be updated. 
  • If a beneficiary is a minor, they would not be able to manage their inheritance.  Think about who should be named to manage their inheritance until they are older and what type of distribution scheme would you like for the minor to receive.
  • What will happen if you become disabled, incapacitated?  Who will take care of any minor children you may have? 
  • If you ignore tax consequences, the result could be additional taxes and thereby reduce the inheritance passing to your beneficiaries.
  • Creating joint ownership of your assets may not be the best action.  Joint ownership could result in tax consequences if the other owner should die before you.  If the other owner encountered financial problems, your jointly owned assets could be at risk.  If the joint owner were to become involved in a divorce situation, your assets could become frozen pending the conclusion of the divorce. 
  • You do not have to treat all beneficiaries the same.  Take into consideration where each beneficiary is in their life – are they good with finances, do they suffer from addiction, are they divorced, are they disabled and receiving governmental benefits?  You may need to consider these special circumstances with regard to distributions.
  • And last, but not least, don’t assume your family will work together after your passing.  After the passing of the second parent, it is not uncommon for deep-seated feelings to surface among siblings.  To the greatest extent possible, have your affairs in order to avoid as many situations as possible.
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Kay Sowa

About the Author

Kay Sowa is a paralegal in the Trusts and Estates Group at Capehart & Scatchard, P.A. She is an IRS Enrolled Agent, an Accredited Estate Planner®, and a Certified Trust and Financial Advisor. She oversees the trust and estate administration practice for the firm. She is an accomplished author and lecturer who has frequently spoken on behalf of a number of organizations including the National Business Institute and the Institute of Paralegal Education.

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