Mistake #1: Failing To Plan
You may think that failing to create a plan is not estate planning and therefore should not qualify as an “estate planning mistake.” However, by failing to plan you allowed a plan to be set up for you. How is that? Well, the court systems have a set of general rules that they follow in regards to estate distributions, which are sometimes altered due to unusual cases. Your failure to plan simply means that you have implemented the court’s plan, and there are good reasons why that is the #1 mistake! Not only is this the biggest mistake you can make for your assets and loved ones, it is also the most common. Over 70% of Americans have no plan in place, not even a basic will. The adage “by failing to plan you plan to fail” seems highly applicable in estate planning. None of us can foresee the future. We do not know when we will pass on or what our situation will be at that time. For that reason, it is important to create a plan today, one that provides for the many potential turns that your life may take. Otherwise you leave the future of your assets and your loved ones in the hands of the court, and it is unlikely that they will handle your affairs in the matter you would choose.
Mistake #2: The Misuse of Joint Property
Many individuals have been misinformed about the proper use of joint property. While joint property can be beneficial for a married couple, it is a risky method of planning in all other scenarios. We have seen a number of situations where a parent, wanting their property to pass to their child without probate or other difficulties, will put their child onto the property under joint tenancy. This is most common with homes or retirement accounts. The downfall in this planning comes when you and your child disagree on the use of that asset. Because you have put your child as a joint tenant, they now own half of that property and share control over it. If you need to sell your home for any reason and your child wants to keep it, you will not be able to proceed selling your own home. Both owners must be in agreement for changes to be made, and since you made your child an equal owner, they have an equal say. You have given your child a huge amount of control which they may not be ready for.
The other major concern is that you have made your assets vulnerable to any creditors or debtors that may come after your child’s possessions. Because they are now a part owner of your property, creditors and debtors can lay claim on those assets. We have seen this result in great losses and ruined family relationships. Be cautious in how you use this method of planning. In fact, the best route is to create a revocable living trust to ensure that those assets are protected and will still pass to whom you wish without complication or probate.
(Check back tomorrow for the second part of this article...)
About Morris Hall:
At Morris Hall, we have focused our legal practice on estate planning for over 40 years. Along with estate planning, our attorneys help clients and their families with matters of probate, trust administration, wills, powers of attorney, business planning, succession planning, legacy planning, charitable gifting and other important legal aspects. We also have divisions in financial, real estate and accounting to help you incorporate all of your planning together, ensuring that everything works perfectly for your needs and situation. Our Arizona offices are located in Phoenix, Mesa, Scottsdale, Tucson, Prescott, Flagstaff and Arrowhead. Our New Mexico offices are located in Albuquerque, Las Cruces and Santa Fe. Contact us today at 888.222.1328 to schedule an appointment!
This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice, please contact an attorney in your community who can assess the specifics of your situation.