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How to Avoid Common Estate Planning Oversights and Errors

November 05, 2018

Estate planning is about more than just having a will; it’s planning for both incapacity and for death, making difficult situations easier to handle, and protecting yourself and your loved ones.  Although most of us don’t like to think about it, chances are that you or one of your loved ones will suffer a disability or period of incapacity during your lifetime; and of course, death is a certainty.  Doing a little planning up front will give you peace of mind in knowing that your affairs are in order should either of these situations arise.

Here are a few tips to ensure your plan meets your needs and the needs of your family.

Override the defaults.  There are default rules in place about who inherits if you die without a will, and who makes medical decisions for you if you become unable to do so yourself.  The defaults may surprise you, may not reflect your wishes, and may result in a poor outcome for your family.  Individuals with blended families may be particularly surprised about the default rules regarding inheritances.  Override the defaults by putting a good plan into place.

Have a good power of attorney.  There is no default rule about who can manage your financial affairs in the event that you become unable to do so.  Although a joint owner on your bank account (most commonly, your spouse) could continue paying bills using that account, he or she could not access funds in your retirement account or sell real property on your behalf without a power of attorney or, if none, without having first been appointed by a court as conservator of your estate.  Avoid costly court proceedings by putting a good power of attorney into place.

Carefully consider the needs of your loved ones.  Do you have a blended family, or beneficiaries with marital, creditor, or substance abuse concerns?   Is anyone disabled or receiving means-tested public benefits such as Medicaid or Supplemental Security Income (SSI)?  Would any of your beneficiaries spend their inheritance as soon as they receive it?  These are all situations in which leaving a loved one’s inheritance in trust will likely result in a better outcome for them. 

Review asset titling and beneficiary designations.  Asset titling and beneficiary designations will always override the provisions of your estate planning documents.  A bank account or a home owned jointly with survivorship will pass to the joint owner upon your death, and a retirement account or life insurance policy which names a beneficiary will ultimately pass to that beneficiary, assuming they survive you.  You may have left everything in your will or trust to Beneficiary A, but if you’ve named Beneficiary B as the beneficiary of all of your assets, Beneficiary B will inherit everything.  In that situation, the bank doesn’t care what your will or trust says.   A good estate planning attorney will not only prepare estate planning documents for you, but also assist you in reviewing your asset titling and beneficiary designations, working with your financial advisor (if any) and making updates as necessary to ensure your wishes are carried out.

Protect minor beneficiaries.  Estate planning is especially important for parents of young children, to make life a little easier for everyone else in the unfortunate event of the parent’s premature death.  Be sure to nominate a guardian for minor children in your will, to care for your children in the event of your passing, and avoid naming minor children as the outright beneficiaries of any of your assets.  Naming a minor child to receive life insurance proceeds, for example, may require court involvement before the proceeds can be accessed on behalf of the child.  Consider leaving assets for the benefit of a minor in trust, and naming a trusted friend, family member, or advisor to serve as trustee.

Update as necessary.  An estate plan created 10-15 years ago may no longer reflect your wishes, the people you named to handle your affairs may no longer be the best to handle that job, and changes may have occurred within your family that should be addressed in your estate planning documents.  Furthermore, a plan created several years ago when the estate tax exemption was much lower may now be unnecessarily complex.  Review your estate planning documents periodically and keep them up-to-date.

Seek the assistance of an estate planning attorney to implement these tips, protect yourself and your loved ones, and ensure your wishes are followed in the event of your death or incapacity.

Jessica Hayes is a Pender & Coward attorney focusing her practice on estate planning and elder law.

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