The Four Basic Estate Planning Mistakes Most People Make
Here are some of the more common estate planning mistakes:
1. Doing nothing: you probably know that is not a good idea. Quite honestly, most people know that they eventually need to prepare an estate plan. It is just not a high priority, which is understandable.
However, planning for just about anything in life is a good idea, and estate planning is no different.
Today in California, the vast majority of people who do estate planning ultimately end up having a living trust and a will. The most common mistakes that I have seen with these documents:
2. Failing to fund the living trust: many people know that a living trust avoids probate. However, that is only partially true. A funded living trust avoids probate, an unfunded living trust ends up being like a will! Fortunately, when a living trust is done with a reputable estate planning attorney, a pour-over will is drafted at the same time. This ensures that your wishes are carried out – even if a probate is required.
3. Having out of date estate planning documents: it is bad form to simply go to an attorney; pay for an estate plan; and not revisit it from time to time. While it does not need to be reviewed monthly, it does need to be reviewed occasionally as major life changes occur. It does make sense to visit with an estate planning lawyer every year or two to make certain that everything is up to date!
4. Failing to plan for incapacity: we are living longer. When social security was established under President Franklin Roosevelt in the 1940's, the average American did not live past age 65. How times have changed in the last three quarters of a century.
Moreover, not only are we living longer, but the reality is that at least 50 percent of us will be incapacitated before we pass. It might be for a month; it might be for a year; it could be for five years; and it is not infrequent that it is for ten years or more.
Do you have a plan in place as to what is going to occur should you become incapacitated? Do you know that your plan can be implemented effectively? Too many people are unable to answer “yes” to both of these questions.
Failure to plan is planning to fail. It means that your heirs, whether your children or others, will have to “work” harder to take care of everything. Moreover, failure to plan is a huge cause of internal family strife during an already difficult time.