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.
In this article, we will discuss the next 3 mistakes of the top ten mistakes made in estate planning. The final 4 will be discussed in two separate blog articles to follow next week.
4. Failure to choose the correct fiduciary
Find out what's happening in Livermorewith free, real-time updates from Patch.
A fiduciary is someone that acts on your behalf and must act in your best interest. When creating an estate plan, several positions must be filled with people that will act as a fiduciary. These positions include the following:
i. Personal Representative/Executor of a Will — Assumes responsibility for assets controlled by your will and carries out the instructions left in that will.
ii. Successor Trustee — Assumes complete financial control of trust assets after your death or disability. They administer the trust and manage and invest the property held in trust.
iii. Health Care Agent — Makes ALL your healthcare decisions for you when you are unable to do so yourself. Such decisions include, but are not limited to, whether or not to continue life support measures.
iv. Financial Power of Attorney — Has financial control of your property and can act on your behalf in any number of financial situations.
v. Guardian for Minor Children — Takes care of your minor children or adult children who are unable to take care of themselves. They make decisions with regard to healthcare, education, religious training, discipline, and all other decisions you would make for your child.
Find out what's happening in Livermorewith free, real-time updates from Patch.
When choosing a fiduciary people typically choose their adult children, sibling, or parent without giving much thought to the types of decisions that role requires, the responsibility this person will now have, or the amount of control that comes as a fiduciary. Each fiduciary position should be filled with consideration given to each person’s individual qualifications, personality, current and possible future living and financial situation, and background.
5. Failure to title assets properly
Your property must be titled correctly if you want the instructions in either your will or trust to apply to your property. For a will to control how property is to pass at death the property must be titled in your own name. As for a trust, a trust’s instructions apply to property that is funded in the name of the trust. If that property isn’t funded correctly, the property will pass as if you never created a trust. Therefore, failure to title your assets properly will insure that your estate plan will fail.
The most common scenario is where people leave their property (e.g. their home) titled as joint tenants. What many people don’t realize is that the concept of joint tenancy has what is called “a right of survivorship.” A right of survivorship will automatically transfer by law to surviving joint tenants the dead joint tenant’s interest in that property. While desirable in some situations, where someone creates an estate plan either by will or trust they typically want their property passing according to the instructions laid out in those documents. If the property is left in joint tenancy, the property will pass automatically to those named joint tenants and may cause unintended results, such as, possibly disinheriting your children.
6. Failure to plan for creditors and predators
Most people when they create an estate plan think about only saving taxes or avoiding probate. However, an estate plan can also help protect your assets against many unforeseen events, such as:
i. Future Divorce — Money going to the relatives of your children’s ex-spouse in the event of a divorce;
ii. Remarriage — Money intended for your descendants instead goes to your spouse’s new husband; and
iii. Catastrophic Creditors — Money ending up in the hands of your spouse’s or children’s medical or judgment creditors.
A properly designed estate plan will protect against such possible contingencies and help insure that your property reaches the intended people.
As mentioned above, the final top 4 mistakes made in the estate planning process will be discussed in two separate blog articles that will be posted next week.
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.
