By Matthew Solari
It has been my experience that people typically do not want to pay the IRS more money or give up control of their affairs to someone else. Unfortunately, all too often people fail to create an estate plan that is ready to take on the many challenges that should be anticipated in advance.
In the article Top Ten Mistakes Made in Estate Planning, Ronald P. Kendall discusses 10 common mistakes that both individuals and attorneys make when they go through the estate planning process.
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In this article, we will discuss the first 3 of the top ten mistakes made in estate planning. The other 7 will be discussed in a series of other blog articles to follow.
1. Planning only to avoid probate and save on taxes
An estate plan should obviously save your family from paying those much feared taxes and avoid probate. However, a well designed estate plan will also take into consideration the circumstances surrounding you and your family; as well as, your individual goals and motivations for putting together an estate plan. What these might be will vary according to the individual. Each person has different goals in life and no two people have the same family.
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An estate plan is also created for the living and not only for the dead, so plan accordingly. There are 3 different phases in the life of an estate plan and they are
i. While you are alive and well,
ii. While you are alive, but not so well (disability), and
iii. After you are dead
Notice probate and estate taxes occur after you have passed away. Thus, planning only to save taxes and avoid probate is only part of one piece of the estate planning puzzle.
2. Failure to realize that a will does not avoid, but actually guarantees probate
Few people know what probate entails, but we all know we want to avoid probate. The probate process is notoriously long, expensive, and completely public. During the probate process you lose all control. You will lose control to the judge. The judge has the final word in the probate process. You will lose control to the beneficiaries. The beneficiaries can change the distribution of a will. You will lose control to your spouse. The surviving spouse could remarry and pass your assets on to his or her stepchildren.
Avoiding probate is one of the primary estate planning goals for the vast majority of people. However, a will won’t avoid probate. A will guarantees that your family must endure a probate after you are gone.
3. Failure to have an estate plan of your own
Without an estate plan your property will pass according to state law to your spouse, children, or next closest relative in an amount dictated by these laws.
A decent estate plan will incorporate at minimum both a will and a trust. Two other big reasons, in addition to mistake #2 discussed above, why I don’t advocate solely using a will for an estate plan are 1) a will only controls what happens after you die, and 2) a will only controls the distribution of property passing through probate. Therefore, a will cannot control things while you are alive and it has no effect on property passing outside probate.
The only property that passes through probate is property owned in the decedent’s name. Therefore, a will has zero effect on property held as joint tenants and property controlled by contract; such as: Assets that are payable or transferable on death, life insurance proceeds, or distributions from retirement accounts. However, a trust’s instructions will instantly apply to property that was properly funded in the name of the trust.
As mentioned above, the other top 7 mistakes made in the estate planning process will be discussed in a series of future blog articles.
For additional information on estate planning and what to avoid, attend one of our upcoming workshops or call us to make an appointment.
Visit Solari Law's website at solari-law.com
Disclaimer: The information provided in this article is for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this article does not create an attorney-client relationship between Solari Law and the user or browser.
