Six Estate Planning Mistakes to Avoid at All Costs
Oct. 30, 2020
There are many mistakes you could make with your estate plan. We have all seen stories of celebrities who passed away with problematic estates. When Prince died in 2016, he did not leave an estate or will behind. Prince is not the only celebrity to make mistakes with estate planning. As a result, his children did not receive his $200 million estate. Deceased actor Heath Ledger failed to add his then 2-year-old daughter as a beneficiary on his estate plan.
Easy to avoid, but difficult to fix after you have passed away or become incapacitated by senility or stroke. With the help of a skilled estate planning lawyer, you can avoid some of the following mistakes.
Mistake #1: Dying Without an Estate Plan
This is the biggest estate planning mistake you could make. When you die without a will or trust in place, state law determines how your assets pass to your heirs through a process called probate. That means the state may not carry out the wishes you had for your estate. Since there is no will in place, the probate court will choose an administrator. That overseer will use a predetermined formula to split and distribute your property.
Probate can be time-consuming and stressful, even for relatively small estates. Depending on the circumstances, the probate process can take many months or even years with legal fees, administrator fees, filing fees, appraisal fees, bond premiums, publication fees, etc. The costs go on and on.
You should speak with an estate planning attorney to avoid this common mistake. Setting up a living trust, will and powers of attorney can save your family a lot of time and money.
Mistake #2: Failing to Name Beneficiaries or Update Your Estate Plan
Much like in the case of Heath Ledger, you could fail to name certain beneficiaries. These are individuals who receive your assets upon your death or incapacitation. Some people may create a will naming their beneficiaries, but those beneficiaries could pass away themselves. In addition, you could have new potential beneficiaries. You also need to consider whether it is necessary to include new information about certain assets.
I once had a client who neglected to the change the beneficiary on a life insurance policy after he divorced his first wife. Thirty years later, when he passed away, his first wife received the life insurance benefits. The irony was that she was in a nursing home on state aid, and the state got all the money.
You should update your estate plan as needed. Keep in mind, California law governs how estates work. Even simple mistakes could cause major headaches for your loved ones. Fortunately, an estate planning attorney can help you with this process.
Mistake #3: Keeping Digital Assets Out of Your Estate Plan
Many people make this mistake, even individuals who are tech savvy. For instance, banking heir Matthew Mellon had millions of dollars in cryptocurrency accounts. Unfortunately, no one could access the accounts after he died of a drug overdose. The money was never recovered. If you have assets in Ripple, Bitcoin and other cryptocurrencies your estate needs to be able to access these accounts. Without access, your heirs will not receive these cryptocurrency funds upon your death or incapacity.
However, there are other types of digital assets to consider. Your heirs could lose intellectual property, social media accounts and gaming accounts (like Steam) forever if you do not plan ahead. An estate planning attorney can help you inventory your digital assets so you can include them in your estate plan.
Mistake #4: Failing to Set Up Powers of Attorney
You should set up powers of attorney, even if you are in good health. Life can throw some nasty curveballs. If you became incapacitated and unable to make decisions, then powers of attorney could save you and your family a lot of trouble. However, there is more than one power of attorney, each with its own limitations and rules. You should speak with an elder law attorney to determine which power of attorney is most appropriate for your situation.
Mistake #5: Failing to Properly Fund Your Living Trust
Revocable, or “living trusts”, are a great way to keep your assets from entering the probate process. However, it is important to understand that you must properly fund the trust after its creation. Certain types of assets require paperwork to transfer ownership of the assets to the revocable trust. If you fail to transfer ownership to the trust, then any assets not owned by the trust could go through probate. An estate law attorney can help you with this process.
Mistake #6: Not Speaking With an Estate Law Attorney
Unfortunately, there are many other mistakes you could make while setting up your estate plan. Our firm has only scratched the surface on this topic. By consulting with an estate planning lawyer, you can avoid some of the most common mistakes, including the ones not mentioned in this blog. Mistakes can be very costly and time-consuming for all parties involved.
About the Law Offices of Robert L. Firth
At the Law Offices of Robert L. Firth, we understand the importance of taking care of you loved ones and ensuring their future once you are gone. Inland Empire estate planning lawyer Robert L. Firth can help you establish a lasting and effective estate plan.
Our firm serves clients in Palm Springs, Palm Desert, Cathedral City, Rancho Mirage, Indio, Indian Wells, Banning, Beaumont, Redlands, Riverside San Bernardino and the surrounding areas. Contact us today for a consultation. Please bring your driver’s license and Social Security card for your first appointment.