Because estate planning involves actively thinking about and planning for issues that arise from getting older, possible disability, or death, many people put it off or simply ignore it all together. Avoiding these unpleasant realities can make things worse, create unnecessary hardship, inflate expenses, and cause trauma for those loved ones left to manage things without a guide or toolkit.
The recent proliferation of online estate planning document services, such as LegalZoom®, Rocket Lawyer®, and Trustandwill.com, may mislead people into thinking that estate planning is a do-it-yourself project that involves filling out simple forms. Proper estate planning involves far more than filling out forms.
When you don’t understand the entire legal process involved at the point of incapacity or death, and if you don’t have a handle on the assets at stake, you may have a false sense of security that your DIY will or trust can keep your family out of conflict and will avoid extraordinary costs. Mistakes in these DIY documents are often not discovered until the documents are in play and it’s too late to change them. Then, your loved ones are stuck cleaning up a mess. This defeats the purpose you intended when you created these documents in the first place.
Estate planning is not a one-size-fits-all endeavor. Even families that believe they have a “simple” estate should personalize their plan. Here are 10 of the most common estate planning mistakes, starting with the worst blunder of all: failing to create an estate plan at all.
1. Leaving No Estate Plan at All If you die without an estate plan, the court will decide who inherits your assets. Florida’s intestate succession laws determine who is entitled to your property. That decision is based largely upon whether you are married and if you have children. Spouses and children are given top priority, followed by your other closest living family members. And it makes a difference if you are married to your children’s other parent or are in a subsequent marriage. If you are single with no children, your assets typically go to your parents and siblings, and then to more distant relatives if you have no living parents or siblings. If no living relatives are located—which is rare—your assets would go to the state. Florida’s intestacy laws only apply to blood relatives, so unmarried partners and close friends would get nothing. If you want someone outside of your family to inherit your assets, you should leave an estate plan.
If you’re married with children and die with no plan, it might seem like things should go smoothly, but this situation can be even more complex. If you’re married, but have children from a previous relationship, for example, the court could give everything to your spouse and leave your older children with nothing. Or maybe you don’t want your kids to receive your assets—maybe they are independently wealthy—but without a plan, state law would control that decision.
Dying without a plan leaves open the possibility for your surviving loved ones to get into an ugly battle over who has the most right to your property. If you become incapacitated, your loved ones could fight about your medical care. You may think this would never happen with your loved ones, but it is common enough for concern (even where there is no significant financial wealth at stake).
Your death or incapacity doesn’t have to be any more painful or expensive for your family than it already will be.
2. Thinking A Will Alone Is Enough Many people believe that a will is the only estate planning tool they need. A will ensures that your assets are distributed as you wish. Although a will is a fundamental part of an adult’s estate plan, alone it has major limitations:
Wills require your family to go through the court process known as probate, which can not only be lengthy and expensive, it’s also completely open to the public and can create ugly conflicts among your loved ones.
Wills don’t offer you any protection if you become incapacitated by illness or injury and are unable to make your own medical, financial, and legal decisions.
Wills don’t cover jointly owned assets or those with beneficiary designations, such as life insurance policies and 401(k) plans.
Wills don’t provide any protection or guidance for when and how your heirs take control of their inheritance.
Naming guardians for your minor children in your will can leave them vulnerable to the care of strangers during that time before the will is admitted to probate by a judge.
If your estate plan consists of only a will, you are missing valuable safeguards for your assets and your family will go through court. The above issues can be effectively managed using a trust, but trusts are by no means a simple fix. Trusts come with their own unique procedural rules which can be complicated to understand, especially if you try to prepare a trust on your own.
3. Creating A Trust & Not Properly Funding It Many people know that a trust can keep your family out of court. You may think you can just go online to set up your own trust or have a lawyer do it with you as a one-size-fits all solution. And while that might be true, particularly if you have very simple assets and few family members, you will likely overlook one of the most important parts of creating a trust: funding it.
An unfunded trust is a trust that exists but doesn’t hold any of your assets because you didn’t retitle them properly or because you acquired new assets after creating your trust. This is all too common, and it can leave your family without any of the protections a trust provides.
Funding your trust properly means you re-title you assets in the name of the trust. The trust then is the owner. This is important because if any assets are not properly titled, the trust rules won’t apply. Your family will have to go to court to take ownership of your assets and property. When you acquire new assets after your trust is created, you must make sure those assets are properly titled into your trust as well.
While many lawyers will create a trust for you, few will walk you through the funding process.
Our firm will not only provide you the resources to retitle your assets when you initially create your trust, but we will also continue to help you with any new assets you acquire over the course. This helps prevent your family from being forced into court because your plan was never fully completed.
4. Not Leaving an Up-To-Date Inventory of Assets
Even if you’ve properly funded your assets into your trust, your estate plan will be worthless if your heirs don’t know what you have or where to find it. There’s more than $58 billion dollars’ worth of lost assets in the U.S. Department of Unclaimed Property right now. That’s because someone died or became incapacitated without letting anyone know how to locate their assets.
This is especially critical for digital assets like cryptocurrency, social media, email, and data stored in the cloud, because if you haven’t properly addressed these assets in your estate plan, they could be lost forever if something happens to you. Creating and maintaining a comprehensive inventory of your assets should be a standard part of your estate plan.
We can help you create a comprehensive asset inventory. Just by filling out our Inventory and Assessment Intake Homework, you have given yourself and your family an important list of everything you currently own. We can instruct you on how best to transfer those assets upon your death, and we provide clear instructions on how to do so.
5. Failing to Regularly Review & Update Your Estate Plan
Things change, which means that you should regularly review and update all of your planning documents. Far too often people prepare a will or trust, then put it into a drawer or on a shelf and forget about it.
An estate plan is not a one-and-done deal. As time passes, your life circumstances change, the laws change, and your assets change. You should update your plan to reflect these changes if you want your plan work as you intended it to.
We recommend you review your plan annually to make sure its terms are up to date. Your plan should be immediately updated following major life events like divorce, births, deaths, and inheritances. When you create your plan with us, we invite you to make an appointment every three years for a more thorough (and free) attorney review.
Next week, in part two, we’ll wrap up our list of the 10 most common estate-planning mistakes. If you are ready to get your estate planning handled or would like us to review the documents you currently have, contact us to get started. We can schedule a meeting that is custom designed to your assets, your family, your wishes. We will educate you and work together to reach your objectives for the people you love most.
This article is a service of Jennifer Winegardner of Rayboun Winegardner, PLLC. We do not just draft documents; we ensure you make informed and empowered decisions about life and death for yourself and the people you love. That's why we offer a Family Wealth Planning Session,™ during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session.