The Biggest Estate Planning Mistakes to Avoid

Some of the biggest estate planning mistakes are easy to avoid, including having an up-to-date will, checking beneficiary designations and planning younger.

Nobody likes to plan for events like aging, incapacity, or death. However, failing to do so can cause families burdens and grief, thousands of dollars and hundreds of hours.

Fox Business’ recent article, “Here are the top estate planning mistakes to avoid,” says that planning for life’s unexpected events is critical. However, it can often be a hard process to navigate. Let’s look at the top estate planning mistakes to avoid, according to industry experts:

  1. Failing to sign a will (or one that can be located). The biggest mistake is simply not having a will. I’ve written on this often (see here for example https://www.galliganmanning.com/everyone-needs-an-estate-plan/), but unfortunately clients consistently say they didn’t think they needed a will. Estate planning is critically important to protect you, your family and your hard-earned assets—during your lifetime, in the event of your incapacity, and upon your death.  In addition to having a will, it needs to be findable. The Wall Street Journal says that the biggest estate planning error is simply losing a will. Make sure your family has access to your estate planning documents.
  2. Failing to name and update beneficiaries. An asset with a beneficiary designation supersedes any terms in a will. Review your 401(k), IRA, life insurance, and any other accounts with beneficiaries after any significant life event. If you don’t have the proper beneficiary designations, income tax on retirement accounts may have to be paid sooner. This may lead to increased income tax liability, and the designation of a beneficiary on a life insurance policy can affect whether the proceeds are subject to creditors’ claims.  In many cases where clients tried to avoid probate, one broken beneficiary designation becomes the sole reason to probate the will.

There’s another mistake that impacts people with minor children, which is naming a guardian for minor children and then naming that person as beneficiary of their life insurance, instead of leaving it to a trust for the child. A minor child can’t receive that money. It also exposes the money to the beneficiary’s creditors and spouse.

  1. Failing to consider powers of attorney for adult children. When your children reach age 18, they’re adults in the eyes of the law. If something unfortunate happens to them, you may be left without any say in their treatment. In the event that an 18-year-old becomes ill or has an accident, a hospital won’t consult with their parents if a power of attorney for health care isn’t in place. Unless a power of attorney for property is signed, a parent may not be able to take care of bills, make investment decisions and pay taxes without the child’s signature. This could create an issue when your child is in college—especially if he or she is attending school abroad. It is very important that when your child turns 18 that you have powers of attorney put into place.

If you have any of these estate planning mistakes in your plan, please contact us for a consultation to fix these mistakes for you and your family.

Reference: Fox Business (October 15, 2019) “Here are the top estate planning mistakes to avoid”

Continue Reading

Estate Planning Without Children: Issues to Consider

Planning without kids
Estate planning without children is just as important, if not more important, then estate planning for couples who do have kids.

Estate planning without kids is very important and raises unique issues to address.  If you and your spouse don’t have children, the focus of your financial legacy may be quite different from what it would be if you were parents.  In fact, due to changing demographics, families often have less children than before or no children.  However, couples often ignore planning as they think they do not need to plan without kids.

Motley Fool’s article, “5 Estate-Planning Tips for Child-Free Couples,” suggests that you may want to leave some of your money to friends, family members, charitable organizations, or your college. No matter the beneficiaries you choose, these estate planning tips are vital for couples without children.

  1. A will. You need a will because couples without children don’t have natural heirs to inherit their wealth. If you die without a will, your assets also may not go to your spouse. The state intestacy laws determine which of your family members inherit from you, especially if neither of you have wills. The family of the first spouse to die may be disinherited.  All of this can be eliminated by having a will directing your inheritance to beneficiaries of your choosing.
  2. A power of attorney. Who will make financial decisions for you, if you and your spouse become incapacitated? You can select a person to do this with a power of attorney (POA). You can name a person to pay bills, manage your investments and handle property matters, if you’re unable to do so yourself.  Failing to do so may require an expensive guardianship.  You also very much need medical powers of attorney so that someone you know can make medical decisions for you if you and your spouse cannot.
  3. Up-to-date beneficiaries. If you have retirement accounts or life insurance policies, the distribution of the proceeds at your death is made by a beneficiary designation, not by your will. A frequent beneficiary error is not keeping those designations current.
  4. Give money to charity now. You may think about leaving your assets to organizations that have enriched your life. You can set up a trust to be sure that your money goes where you want. Work with an experienced estate planning attorney to accomplish this.
  5. Remember the pets. If you have furry children, plan for their care when you’re not around to tend to them yourself. You can also put money into a trust specifically intended for the animal’s care or designate an organization that will provide lifetime care for your pet with money you earmark to that purpose as well as name a caretaker to care of the pet after you are both gone.

Remember that estate planning without children is needed just as much as planning for couples with children, and maybe even more.  Considering these issues will help ensure you are protecting in your own estate plan and your inheritance goes to the beneficiaries you choose.

Reference: Motley Fool (September 9, 2019) “5 Estate-Planning Tips for Child-Free Couples”

Continue Reading

Everyone Needs an Estate Plan!

Everyone should have an estate plan
Every adult needs an estate plan, don’t wait until you have an “estate.”

Every adult, whether we have a lot of property or not, should have an estate plan.  A client once told me they didn’t need a Will because they didn’t have an “estate.”  They thought it meant substantial wealth, but estate planning is much more than that.

As we go through the many milestones of life, it’s important to plan for what’s coming, and also plan for the unexpected, even beyond the finances. An estate planning attorney works with individuals, families and businesses to plan for what lies ahead, says the Cincinnati Business Courier in the article “Estate planning considerations for every stage of life.” For younger families, having an estate plan is like having life insurance: it is hoped that the insurance is never needed, but having it in place is comforting.

For others, in different stages of life, an estate plan is needed to ensure a smooth transition for a business owner heading to retirement, protecting a spouse or children from creditors or minimizing tax liability for a family.

This is by no means an exhaustive list, but here are some milestones in life when you need an estate plan:

Becoming an adult. It is true, for most 18-year-olds, estate planning is the last thing on their minds. However, at 18 most states consider them legal adults, and their parents no longer control many things in their lives. If parents want or need to be involved with medical or financial matters, certain estate planning documents are needed. All new adults need a general power of attorney and health care directives to allow someone else to step in, if something occurs.  Michael Galligan from our office gave a great presentation this summer on this topic.  See here for the video.  https://youtu.be/lZUaMVRRTms  

That can be as minimal as a parent talking with a doctor during an office appointment or making medical decisions during a crisis. A HIPAA release should also be prepared. A simple will should be considered, especially if assets are to pass directly to siblings or a significant person in their life, to whom they are not married.

Getting married. Marriage unites individuals and their assets. In community property states like Texas, it creates the new wrinkle of community property.  For newly married couples, estate planning documents should be updated for each spouse, so their estate plans may be coordinated and the new spouse can become a joint owner, primary beneficiary and fiduciary. In addition to the wills, power of attorney, healthcare directive and beneficiary designations also need to be updated to name the new spouse or a trust. This is also a time to start keeping a list of assets, in case someone needs to access accounts.

If this is not the first marriage, there is an even greater need for an estate plan because there may be children from the prior marriage to plan for.  Remember, your assets don’t go to a surviving spouse just because you are married, so you definitely need an estate plan.

When children join the family. Whether born or adopted, the entrance of children into the family makes an estate plan especially important. Choosing guardians who will raise the children in the absence of their parents is the hardest thing to think about, but it is critical for the children’s well-being. A revocable trust may be a means of allowing the seamless transfer and ongoing administration of the family’s assets to benefit the children and other family members.

Part of business planning. Estate planning should be part of every business owner’s plan. If the unexpected occurs, the business and the owner’s family will also be better off, regardless of whether they are involved in the business. At the very least, business interests should be directed to transfer out of probate, allowing for an efficient transition of the business to the right people without the burden of probate estate administration.  You also want to address these issues.  https://www.galliganmanning.com/the-importance-of-business-succession-planning/

If a divorce occurs. Divorce is a sad reality for more than half of today’s married couples. The post-divorce period is the time to review the estate plan to remove the ex-spouse, change any beneficiary designations, and plan for new fiduciaries. It’s important to review all accounts to ensure that any controlling-on-death accounts are updated. A careful review by an estate planning attorney is worth the time to make sure no assets are overlooked.

Upon retirement. Just before or after retirement is an important time to review an estate plan. Children may be grown and take on roles of fiduciaries or be in a position to help with medical or financial affairs. This is the time to plan for wealth transfer, minimizing estate taxes and planning for incapacity.

In sum, it is important to realize everyone needs to plan.  Don’t wait because you think you don’t need one.

Reference: Cincinnati Business Courier (Sep. 4, 2019) “Estate planning considerations for every stage of life.”

Continue Reading