Good luck to your loved ones when you die, because you are going about your estate planning all wrong. According to a recent study from the Center on Wealth and Philanthropy at Boston College, an estimated $59 trillion will be transferred from 93.6 million American estates between 2007 and 2061. However, there is far less clarity about where those assets are going, since those currently holding them can't be bothered to update their estate planning documents or inform potential beneficiaries about their plans.
A recent article from The Street,"5 Biggest Estate Planning Mistakes You Can Make," tells us that more than half (56%) of U.S. parents have a will or living trust document, according to a caring.com survey of adult children. About one-third of parents (27%) don't have estate documents in place, and 16% of adult children have no idea about what's in their parents' estate plans. Another statistic in the clueless area: when parents have an estate in place, sometimes their adult children don't know where these documents are kept—52% of adult children don't know where their parents keep their estate documents, and 58% don't know what the estate planning documents say!
The article cautions that even when you have a will or a trust, there's no absolute guarantee that your assets will be distributed without a hitch. Wills and trusts have kept families in litigation and at odds with each other for years if the estate plan isn't administered properly. To make things easier for your family and make sure your wishes are carried out properly after you pass, try to steer clear of these monstrous errors:
1. Sibling Rivalry. When people fight over their parent's estate, they typically hand over a sizeable piece of their inheritance to the attorneys hired to represent them. If the deceased's children didn't get along while their parent was alive, it will be only the same or worse now. Parents should mitigate this by discussing their estate plans with their heirs before they die. A little explanation, the article reminds us, can go a long way.
2. Unanticipated surprises. What other kind of surprise is there? "Planned surprises?" One critical issue that many times winds up in litigation is the way that the estate taxes are apportioned. They are either written in the will or totally neglected. So for example, the will might say, "I give my house to my daughter Betty, and the estate taxes on this is paid out of revenue." This way you make sure that your estate will be taking care of the estate taxes on the items distributed.
3. Forgetting about your estate plan. Update, update, update! Keep up with your estate planning attorney and let him or her know about new news—like your recent divorce and remarriage or the birth of your first grandchild. If you fail to account for these types of life changes in your family life, you are leaving estate planning leaves your legacy up for grabs. If you thought a divorce, a remarriage, or the blending of families is a major deal during life, after your death—if you don't address your specific wishes—if may be an even bigger nightmare. Talk to an estate planning attorney about a trust for this situation to shield everyone from potential legal repercussions and to ensure your assets go where you designated.
That survey also found that of those that have a will, only 40% have updated it in the last five years, and 25% of adult children don't know if their parents' will has ever been updated.
4. Think about whether to name co-trustees. Some people feel better with their estate planning knowing that their spouse or child will be part of the process. But if they don't have the time, patience and business sense to handle the responsibility and liability of the position of trustee, there's no reason for co-trustees and added stress. This "two-headed" approach may work in some situations but the reason for having only one trustee is that he or she can make swift and decisive decisions. It's hard for a trustee to do so when he or she is acting by committee, even if it's only two people.
5. Watch for undue influence. Personal caregivers can help with the care for your mom or dad, but some have placed themselves in estate plans by exerting pressure and by unscrupulous means during a very fragile and vulnerable time.
Avoid these and other mistakes that can derail your estate planning strategy. Talk to a qualified estate planning attorney and create a sound and safe estate planning strategy. You can learn more about this topic as well as other strategies on our website under the tab entitled: estate planning in Virginia. Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning. However, proper estate planning is not a do-it-yourself project. Why not call us for a complimentary consultation at 757-259-0707.
Reference: The Street (July 13, 2015) "5 Biggest Estate Planning Mistakes You Can Make."