These are
the common mistakes people make about estate planning.
Mistake #1
- Failing to Make an Estate Plan
When
it comes to basic estate planning, I've found that many people simply do not want to deal with it. The typical reasons range
from believing one is too young to need a plan, to thinking there are no assets worth considering, to fear of death, to misperceptions
about costs, to complicated family situations. Some mistakenly believe, “I just don’t need it.”
Suffice it to say that without an estate plan, you'll be leaving your loved ones in the dark, and they'll end up spending
thousands of dollars (that you thought you saved by not creating a plan) figuring out what to do for you if you become disabled
and what to do for themselves after you die. Avoid this #1 estate planning mistake. Begin your planning early, while you still
have your wits about you, and then review and update your estate plan frequently to insure that it will work the way you intended
when it's actually needed.
Mistake #2 - Forgetting About the Little Things
When
it comes to basic estate planning, I've found that many people overlook making a plan for their personal effects, including
jewelry, art work, and collectibles. They simply assume that their loved ones will be able to agree on how to divide it all
up. I have found these things are what people argue over the most. Just recently I worked on an estate where two siblings
litigated for four years over the "stuff" left in their mom's house. What they spent on attorneys’ fees far exceeded the value of the things
Mom left behind. And their relationship was so damaged in the process that it will be extremely difficult
to heal. Don't let this #2 estate planning mistake happen to you and your loved ones.
Ask what everyone wants and then make a simple but smart plan for your personal belongings.
Mistake
#3 - Failing to Fund Your Revocable Living Trust
When it comes to basic estate
planning, I see this mistake over and over again - people who don't understand the importance of funding their revocable living
trust. If you have taken the time and spent good money on creating a solid foundational estate plan, then don't stop there,
or your assets could end up in a court-supervised guardianship if you become disabled. After you die the
assets you failed to put into the trust will end up going through probate. Avoid this
#3 mistake by taking the time to go through the legal formalities to fund your trust. For example, if you
want your house to be in your trust then you need to deed it to the trustee, even if you are the trustee!
Mistake
#4 - Choosing the Wrong Fiduciaries
When it comes to basic estate planning, this is another
common mistake. People who choose the wrong people or institutions to serve as their Personal Representatives,
Successor Trustees, Attorneys in Fact, or Health Care Agents are just asking for trouble. In fact, choosing the right fiduciaries
for your estate plan is just as important as creating the plan in the first place, since your plan depends on your fiduciaries
doing their jobs capably. There are two essential qualities for any fiduciary. First, the fiduciary
must be trustworthy. Second, he or she must be capable to do the job. This includes
the ability to resist pressure from competing interests, as well as the capability of know when to seek help from skilled
advisors such as financial planners, accountants, and attorneys.
Being
a fiduciary is a thankless job. Family members who serve in this role very often become the object of scorn
by other loved ones – even in the best of families!
Avoid this #4 estate planning mistake by working with your
estate planning attorney to choose the right people or institutions for the right jobs.
Mistake
#5 - Making Your Estate Plan Too Complicated
When it comes to basic estate planning, some people go over
the top and make their plan so complicated that it will take over a dozen lawyers and accountants and a judge, not to mention
hundreds of thousands or even millions of dollars, to unscramble the plan and make it work. An overly complex estate plan
will not only frustrate your loved ones, but it will also tie the hands of your fiduciaries since they won't be able to do
their jobs without seeking expensive professional advice. Avoid this #5 estate planning mistake by working with your estate
planning attorney to create a practical and common sense estate plan that will work as you intended but without the need for
advice from multiple attorneys and accountants.