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The Top Five Estate Planning Mistakes – Are You Making Them?

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!  Over 70% of Americans have no plan in place, not even a basic will.

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.  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.    Both owners must be in agreement for changes to be made.

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 possessions.  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.

Mistake #3: Not Funding the Trust

Many people create a living trust but forget a very vital step which we refer to as “funding the trust”.  The whole purpose of an estate plan is to avoid probate, protect your assets and distribute them according to your wishes.  In order to do this, your assets (such as your home and any other property, retirement accounts, bank accounts, investments…etc) need to be protected by the trust by being held in the name of the trust.  If those assets are still held in your name, they will go through probate and your estate plan is left unable to achieve the goals for which you created it.

Unfortunately, we have seen situations where a trust was created and properly funded.  Then, perhaps 5-10 years later a new property is purchased or a new retirement plan is created and the client forgets to put these new assets under the name of the trust

Mistake #4: Failing To Update Your Documents

It’s been said that “Life IS change” and such it is.  For this very reason, it is extremely important to have your estate planning documents reviewed regularly and updated as needed.  Marraiges, divorces, children, grandchildren, combined families, moving to a new state; all of these are changes that can dramatically affect your estate plan.  After any major life event, your documents should be reviewed by your MH estate planning attorney to ensure that they still accurately meet your needs and wishes.

Not only does your life change, but the law changes as well.  We all know that laws are fluid things, they change over the years and our planning must change with them.  In recent years, several major law changes have occurred that have a major effect on estate planning.  Any documents created before these changes were made needed revisions in order to make them in accordance with the current law.

Morris Hall recommends reviewing your estate planning every 3-5 years to ensure that all major changes in your life and in the law are incorporated into your plan as needed.  We do not charge to review your documents, so make sure you take advantage of regular reviews.

Mistake #5: Assigning Roles Incorrectly

While we want to believe that our loved ones would make correct decisions on our behalf, this isn’t always the case.  The first role that needs to be carefully determined is who to assign as the executor of your estate.  The executor will be responsible for ensuring that the trust is administered after your death, paying off any debts and obligations, collecting all the assets and distributing the remains of the estate to any beneficiaries according to the dictates of your estate plan.  This is a difficult and time consuming process which requires a highly dedicated individual.  In some cases, a loved one may not be the best selection.  In such cases, you can choose an adviser or a company, such as MH, to act in that role.  There is usually a fee involved for this service because there is a large amount of work involved.  Whichever route you choose to go, make sure your selection is a careful one.

Another important selection that should be decided carefully is who should make decisions on your behalf if you become incapacitated.  You will assign one or more persons to make medical, financial and personal decisions for you.  This should be a person that you trust implicitly.  It should also be someone that respects your wishes enough that they can set aside their own desires to see that yours are fulfilled.  For example, you may have informed them that should you ever be in a permanent vegetative state that you would like to be removed from life support.  They may have to overlook their personal desires to continue to support your life artificially in order to put your wishes first.  Sometimes family members are too emotionally involved to act in these roles and some clients choose to have friends or professionals assigned in those roles instead.  However you choose, make sure you do it thoughtfully and carefully.


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