Estate planning can be a complex area of law. At Mortensen & Reinheimer PC, new clients come to our practice on a regular basis with an important concern, even something that alarms them, for their estate planning. These "mistakes" are often of their own making but can also be due to numerous other factors, including changes in the law, fluctuations in family dynamics, divorce or a slew of other variables that occur regularly. Below are ten of the most common (but, frankly, the complete list is much longer).
- Failing to have an appropriate plan in place - If you don't have a living trust in place, California's probate courts will determine the distribution of your assets. If you have completed this critical first step, congratulations - but you're not "out of the woods" yet. There are several key legal elements to every estate plan and failure to include any of them can have severe consequences. On top of those "basics," your specific circumstances will dictate other key items that should be in place for your tailored plan.
- Neglecting your plan - An estate plan shouldn't be a "done and forget" matter. For example, in the event of a marriage, family addition or death, beneficiary designations might need modifications.
- Improper ownership of assets - Whether for creditor protection or whether certain assets should be kept inside or outside a trust (or have their own trust), setting up proper ownership of assets can be critical for your estate plan. If business ownership is involved, it is crucial to look at all assets involved for proper titling.
- Improperly funding your trust - Your trust is only effective if it is properly funded, including properly titling your assets, obtaining your taxpayer identification number (TIN), handling personal property, and more.
- Not keeping up with estate tax changes - Whether your estate is large or small, it pays to know how much it will be taxed - and changes in the law can happen, such as the federal exemption under discussion by the Biden administration.
- Failure to consider charitable gifts - You may have spent a lifetime donating to your church, alma mater or other charities; do you want to incorporate this charitable giving in your estate plan? If so, it is important to evaluate which are the correct assets to fund these gifts and how to do so.
- Not discussing your plan with your heirs - A "family meeting" is a great time to share your love of your family, goals for your distribution of assets, and best wishes for all involved. It can help to ease concerns and settle expectations. Instead of avoiding it because of fear or thinking it will be uncomfortable, ask your estate planning attorney to help by running the meeting for you.
- Not contacting your attorney after death of your spouse - Depending on your trust structure, certain changes may need to take effect (such as an A/B type trust, in which the trust property is split into an "A" trust for the surviving spouse and a "B" trust which holds the decedent's half of the estate). Also, it isn't unusual for the surviving spouse to soon become incapacitated and then a successor trustee needs to be involved.
- Adding a co-signer to bank accounts - While this may seem prudent in everyday life, you are subjecting that account to his/her creditors. Instead, consider appointing a Durable Power of Attorney with authority to manage your affairs.
- Failure to protect a disabled beneficiary - Whether for a disabled adult or special needs minor, consider specific provisions (e.g., a Special Needs Trust or conservatorship).
Avoid these mistakes!
At Mortensen & Reinheimer, PC, we are here to guide you throughout the process. Please call us today for a consultation to discuss your estate planning needs.