Estate Planning Mistakes You Need To Avoid

Estate Planning Mistakes You Need To Avoid

This year’s COVID-19 pandemic has left many people wondering what would happen to their family should an unexpected illness arise, or the unthinkable occurs and a family member passes away. Therefore, it is important to prepare your plan with an Orange County estate planning attorney.

Unfortunately, there are many families that will be subject to the probate process, higher capital gains taxes, or guardianship disputes. However, all of this can be avoided if you make sure your estate plan is in proper order now. 

Developing your plan with a trust attorney in Orange County can help you avoid the common mistakes we see when people have opted to prepare their own plan or have an unfortunate experience with an unqualified estate planner. 

Before we take a look at the estate planning mistakes we see, and the ones you can avoid, let’s go over the basics.

What is an Estate Plan?

An estate plan is more than wills and trusts that designate who will receive your property and assets. While this is an important element that ensures reduced taxes and family discord, there are other aspects of the plan that are just as important.

Guardianship designations are often incorporated into an estate plan. This creates a legal document that determines who will care for your minor children should something happen to you and your spouse. 

Other elements of an estate plan direct what will happen should you become incapacitated. These include the Power of Attorney (POA) and End-of-Life Care. 

The Most Common Estate Planning Mistakes

Do-It-Yourself Options

While the World Wide Web has created vast resources and DIY options, from home improvement to being your own lawyer, just one mistake on a DIY prepared estate plan can lead to a contested plan.

As you’ll see, estate planning is highly specialized and regulated. Taking the DIY approach is setting you and your loved ones up for potential unnecessary hardships.

When Consumer Reports tested three will-writing software products with the help of a law professor, they concluded that all were inadequate unless a very simple plan was required.

Outdated Beneficiary Designations

Another mistake commonly seen is forgetting to name a contingent beneficiary. This determines the person who would become the beneficiary should the primary beneficiary pass away or decline the property.

If you have named multiple co-beneficiaries, understand that, if real estate is involved, they must agree on everything, including whether to sell and what price to accept.

If you believe this may lead to disagreements among family members, it may be best to consider putting the property into a trust which is then controlled by the trustee.

Additional beneficiary considerations include naming a minor as the direct beneficiary. While some states allow this, it is very difficult for someone under the age of 18 to receive these benefits.

If a trust has been created, the trustee can manage and allocate the money for your children until they are of legal age.  

No Plan

It’s hard to imagine in our current uncertain environment, but procrastination is a part of human nature, and planning for the end of life  is no different. 

After Jimi Hendrix died in 1970, at the age of 27 and without a will, the fight over his estate lasted for more than 30 years. According to USA Today, when Prince died in 2016, at the age of 57 and without a will, he left an estate worth approximately $200 million, and about half of that will be consumed by federal and state estate taxes.

Failure to Update Plan

As Heraclitus said back in the 5th century BC, “Change is the only constant in life.” Whether this change involves family relations, state or federal regulations, or the birth of a child, not updating an estate plan when appropriate is one of the most common mistakes we see.

If there has been a change in family members or relations, be sure that your estate plan reflects your current wishes.   

Some people are unaware that legal documents such as trusts, wills, and POA are driven by state law. If you have moved to a different state such as California, it’s recommended that you review your estate plan with an estate professional such as an Orange County estate planning attorney

Regulations are constantly being updated and revised. When the Tax Cuts and Jobs Act of 2017 went into effect, the federal estate tax exemption was temporarily doubled. The new tax rules are set to expire come 2026 and will revert back to those established in 2017. Unless, of course, additional regulations come into play. 

Misunderstanding the Difference Between a Will and Various Types of Trusts

As you have probably surmised, estate planning can be a complicated process that requires a trust attorney in Orange County to keep up-to-date on the many rules and regulations pertaining to estate law. 

Clients come in requesting a will when often what they need are both a will and living revocable or irrevocable trust, or they have a marital trust in place when they and their family would be better served with a credit shelter trust.

There are actually numerous types of trusts including testamentary, Totten, spendthrift, special needs, and generation-skipping.

An example of one of the primary considerations is the difference between irrevocable and revocable trusts. While revocable trusts are often recommended due to their ability to be altered as life changes, they do not protect assets from creditors or Medicaid spend-down. 

Don’t  Forget Your Best Friend—Fido

Pets are a part of your family, too. In some cases, the best part. If you have a special trust set aside for them which can be used for their care, you decrease the risk that they will be placed into a shelter once you are unable to care for them.

If your state does not allow a pet trust, or your trust attorney in Orange County does not recommend one, you can designate someone to take over their care and provide them with financial support in your will. 

Failure to Update or Include Powers of Attorney (POA)

Many people fail to take into account the necessary directives that are needed before they die. These include end-of-life decisions and who is responsible should you become incapacitated.  

Designating a durable POA for health care as well as one for finances is recommended.

Choose the Right Trust Attorney in Orange County

While developing an estate plan may seem overwhelming, it doesn’t have to be. Our Orange County estate planning attorneys have extensive experience in customizing these plans.

In order to ensure your assets are preserved and passed on to the people you care about, choose the right trust attorney to help you in your estate planning process.

For a complimentary consultation, contact our team at Parker Law Offices today.

Maria Parker assists her clients plan for their end of life health care wishes and the ultimate distribution of their wealth after death. She personally experienced the importance of planning at the time her father passed away.

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Estate Planning Attorney in Orange County, CA
Wills & Trusts, Estate & Trust Administration, Probate, and Health Care Power of Attorney
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