Top Estate Planning Mistakes
It Is Time To Plan Your Estate, And We Want To Help You Avoid Estate Planning Mistakes.
At Rees, Kincaid, and Stanfield, we would like to point out the various considerations about “Estate Planning” and a few general ways to handle them. At times it is simplified to make a point. Each person’s situation is different, and it deserves individual attention. What follows is an overview, and it is not intended as a substitute for advice from a qualified attorney. It may, however, aid you in becoming more precise about your concerns and your situation.
Top 10 Biggest Mistakes in Estate Planning
- Not Updating Your Beneficiary Designations. Whether you execute a Will or a Trust, your beneficiary designation for your assets will typically override any bequest you leave in your main planning document. It is critical for your estate plan to work closely with your beneficiary designations to avoid probate and minimize the cost of administering your estate. With the right language, you can often set a beneficiary designation that won’t ever need to be changed. Wouldn’t that be nice?
- Adding Family Members as Joint Owners of Assets. Although doing this may seem like a quick and easy way to transfer ownership of assets such as cars and bank accounts, there can be hidden risks. When you add a joint owner to an asset, you make a lifetime gift if the value to that person exceeds $16,000.00 in one calendar year. This would require you to file a gift tax return. Adding a joint owner may also expose the asset to claims from spouses and creditors. These risks can be minimized with good estate planning.
- Not Getting Spousal Consent Regarding the Home. Be especially careful when giving or receiving consent to transfer residence. Several states, Kansas being one, require both spouses to consent when conveying or encumbering a homestead. This can be especially tricky for anyone that moved to such a state but had their planning documents prepared elsewhere. If you moved states since your initial planning, you should have your documents reviewed to be safe.
- Hiding Your Original Documents “Too Well.” Although keeping the contents of your documents strictly confidential is fine, be sure to let close family members know where you keep the original planning documents, such as the original Will. Your estate administration attorney must file the original Will within 6-12 months of the date of death, depending upon state law. A bank-safe deposit box or fireproof safe at home is usually a good choice.
- Running Out of Plan. Studies indicate that, on average, most individuals or couples will have three estate plans during their lifetime. It is a good idea to review your plan every 3-5 years to ensure that you are still comfortable with those nominated to handle your financial affairs and health care decisions if needed. Ideally, you should nominate at least three people your age or younger to assist if called upon. The goal here is to “never run out of plan.”
Leaving Assets to One Person “With Instructions.” One common shortcut to appropriate estate planning is choosing a single person to inherit assets but instructing them on how to share the assets with the rest of the family. Doing so runs several risks. First, the person nominated may predecease you or die simultaneously, thus defeating your plan. Second, unintended tax consequences and complexity could flow to the person handling all the funds. Third, there is no guarantee that the person you select will distribute the funds as per your instructions. Work with a good estate planning attorney to ensure your wishes are in writing and enforceable.
- Multiple Marriage Double Cross. Families with children from prior marriages face several unique challenges when planning. Should all children of both parties be treated equally, or does another plan make better sense? Would the surviving partner “double cross” the first to die by cutting their children out of the plan? Statistics indicate that is a real possibility. A good estate plan can address these questions and increase the probability of the assets getting to the right people at the right times.
- Leaving Too Many Assets Outright. Although some young adults may be well suited to inherit a substantial sum, others may struggle to handle the responsibility or even squander the money entirely. Sometimes the children are good and responsible adults but have special needs or are concerned about the current marriage’s strength. These situations can be addressed by leaving funds in a trust managed by a third party. You can decide the terms and timing of the distributions to protect your beneficiaries better.
- Failing to Review IRA Beneficiary Designations. Individual retirement accounts are a tax-advantaged way to save money for retirement. These accounts have proven quite popular and held approximately $11.8 trillion in 2021 (according to Statista). The 2019 Secure Act included major changes to how beneficiaries inherit Traditional IRAs. Non-spouse beneficiaries must now withdraw the funds from inherited IRAs within ten years of inheriting the funds. Previously beneficiaries could “stretch” the inherited IRA throughout their remaining life. If you have not reviewed the impact of this change with your estate planning attorney and your financial advisor, you should do so immediately.
- Getting Real Estate Stuck in Probate. Most states (including KS and MO) now include the option to quickly and easily transfer real estate interests using a Transfer on Death Deed (KS) or Beneficiary Deed (MO). Such deeds allow you to continue owning real estate in your name and then have the interests transferred by operation of law immediately upon death. Make sure that the deeds work in conjunction with your estate plan, as they will override any bequest of the property in a Will or Trust. Don’t forget to plan for any mineral interests you may have purchased or inherited from family members! Also, sign the deed before a notary public and make sure it is subsequently recorded by the County. An unrecorded deed will not be effective.
We know you care about your family, and ensuring that you are not leaving them with a stressful situation is essential to you. We are here to put your estate in order, leaving your loved ones without the stress of sorting out your affairs. Our attorneys are here to ensure that this process is completed promptly and orderly by planning the right distribution of your assets, property, and wealth.
- Durable Power of Attorney
- Advance Directive for Healthcare
- Advance Directive for Mental Healthcare
- Medical Releases
- Avoiding Probate