Inheritance planning is an essential part of securing your financial legacy and ensuring that your wishes are carried out. However, it’s easy to make estate planning mistakes that can have significant consequences.
By learning from the errors of others, you can avoid common pitfalls and protect your assets. Let’s explore some estate planning mistakes that can lead to costly outcomes.
Relying on the State
Some people are under the impression that the state will take care of everything if you die without a will or trust. Indeed, an intestate estate is settled under the supervision of the probate court in your county of residence.
At the same time, this does not mean that the assets will be distributed in the way that you would have wanted. In intestacy situations, the court will appoint a personal representative to act as the estate administrator.
The estate’s assets will be identified and secured by the personal representative. Final debts will be paid, and ultimately, the assets will be distributed under the intestate succession laws of the state of California.
People that you would have never left out could be disinherited or shortchanged if it plays out this way. For example, let’s say that you are unmarried, and you have no children. Your mother has passed, and you have been estranged from your wealthy father for 30 years.
Under this scenario, your father would inherit the entirety of your estate. There is no reason to take chances with intestacy when legal assistance is just a phone call away.
Failure to Update Your Plan
Estate planning is not a “set it and forget it” task. While creating an estate plan is an essential step, it’s equally important to revisit and update it as life circumstances change. Unfortunately, many people create their estate plan and then tuck it away without revisiting it.
Life changes such as marriage, divorce, the birth of children, or changes in financial circumstances can all affect your estate plan. Failing to update your plan could result in outdated instructions that no longer reflect your wishes or accommodate your current situation.
Make it a habit to review your estate plan periodically, especially after major life events. This ensures that your plan remains aligned with your goals and provides for the people you care about.
Settling for a Simple DIY Will
The internet has made it easier than ever to access do-it-yourself estate planning tools. While these services may offer convenience and cost savings, they often fall short when it comes to providing a comprehensive estate plan.
A simple will might be legally binding, but it may not be the best option for your situation.
One major downside of relying solely on a will is that it must go through probate. This is a court-supervised process that can be time-consuming, costly, and public.
During probate, the will becomes part of the public record, which means anyone can access it, resulting in a loss of privacy.
Additionally, a will typically distributes assets in lump sums. If you want more control over how and when your beneficiaries receive their inheritance, a living trust may be a better option.
With a living trust, you can outline specific instructions for how assets are distributed, such as setting up periodic distributions or protecting assets from creditors.
Living trusts also allow assets to be transferred without going through probate, saving time and money for your heirs.
There are also many other types of trusts designed for specific goals. Consulting with an estate planning attorney ensures that you choose the right tools for your situation.
Omission of Incapacity Planning
When you plan your estate, you should address eventualities that can materialize during your twilight years. It is not a pleasant subject to contemplate, but many elders become unable to make sound decisions at some point.
Everyone has heard of Alzheimer’s disease, but you may be surprised to hear that it strikes about one in 13 of those over the age of 65, and one third of those over the age of 84. This is not the only cause of cognitive impairment, and some people cannot communicate due to physical medical conditions.
If you do nothing to prepare for this possibility, the state can be petitioned to appoint a conservator to act on your behalf. This can be an intrusive process, and the person who is chosen may not be someone you would have selected yourself.
Plus, family members can disagree about the correct course of action. This can cause hard feelings during a time when people should be pulling together in support of one another.
To prevent all of the above, you can include an incapacity component in your broader estate plan. It starts with an advanced health care directive, which is used to name a decision-maker for your health care and life-support preferences. You can include your organ tissue donation and comfort care medication choices as well.
You can add a durable power of attorney to name someone to manage your financial affairs. If you have a living trust, you would be the trustee while you are living, and you can name a disability trustee to assume the role in the event of your incapacity.
Attend a Free Seminar!
Estate planning doesn’t have to be complicated, and you don’t have to navigate it alone. To help you learn more about your options, we offer free seminars that cover key estate planning topics.
These sessions provide valuable insights and strategies to help you create a comprehensive estate plan.
There’s no cost to attend, so this is a golden opportunity. Simply visit our seminar page to see the upcoming schedule and register for a session that works for you.
Need Help Now?
If you’re ready to work with a Chico, California estate planning lawyer to put a plan in place, our doors are open. When you engage our firm, you will receive personalized attention. We will learn about your legacy goals, and your plan will be carefully crafted to suit your specific needs.
To set the wheels in motion, call us at 530-343-3454 or send us a message through our contact page.