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Top 3 Estate Planning Mistakes – Debunked

October 18, 2016

Here’s a startling statistic >> 55% of Americans will die without a will or estate plan. It’s startling, but understandable. Most of us prefer not to think about what will happen to our estates when we pass away. Simultaneously though, most of us also worry about taking care of our families and ensuring they are cared for in the long term. 

That’s where estate planning comes into the picture.

Here at Restaino Reddien, we often meet and speak with Western New York residents at our estate planning workshops and events. Several common estate planning mistakes emerge during those conversations — mistakes in action and in thinking that are important to avoid.

Here are the top three estate planning mistakes in action and in thinking that we hear, along with insights and tips to debunk them:

1. “I’m too young for an estate plan.”

Young couples with children tend to rely heavily on the “invincibility” of their youth. Unfortunately, accidents do happen and one day we will all be forced to confront the inevitability of our mortality. Estate planning for younger couples is extremely important as it allows parents to ensure that their children will be properly cared for if the parents were to suddenly pass away. Would you trust an 18 year old child with the proceeds of your retirement account? I wouldn’t either.

Enter the “trusts for minors” clause of a Last Will and Testament, where parents can set certain ages when their children can receive the bulk of their inheritance (i.e. 25% at age 25, 50% at age 30 and 25% at age 35). These trusts are managed by a Trustee, whom the parents appoint, that manages all funds and ensures that the children receive money for health, education and general welfare all while preserving and investing the remaining assets so that the children have a nice nest egg to inherit in the future. Furthermore, Last Wills and Testaments may also appoint guardians of your children in the event of your passing. A guardianship clause is extremely helpful as it prevents any familial bickering regarding who should “take care” of any children and also ensures that you have peace of mind knowing that your child will be in the hands that you choose should anything happen to you and NOT the hands of the Court.

2. I don’t need an estate planning attorney, I can do this myself.

Sure, you may be able to obtain some standard estate planning documents and “fill in the blanks,” but what are you really missing? “Do It Yourself” estate planning may offer a variety of shortfalls. Although you may be able to provide yourself with the physical documentation required when undergoing estate planning, the DIY portion of the process removes the knowledge and expertise of a legal professional who doesn’t merely provide you with documentation, but also provides you with a bevy of knowledge regarding asset distribution and end of life decision making. For example, did you know that if your assets are structured in a certain way, you may not even need a Last Will and Testament at all? Let’s consider an example…

Bill Smith and his wife, Patty, have two children, John and Sally.  In Bill’s Will, he states that all of his assets shall be distributed to his wife, Patty.  Upon his death, Bill has the following assets:

  1. Joint Checking Account with Patty;

  2. MetLife Insurance Policy: John and Sally as beneficiaries; and

  3. Joint Brokerage Account with Patty.

Probate assets are those assets that are to be distributed pursuant to the wishes that are outlined in your loved one’s Will.  Quite simply, probate assets are those accounts that are held in your loved one’s name individually and have no designated beneficiary and/or joint owner on file.  Looking to our example above, we do not have any probate assets.

Non-Probate assets are not distributed pursuant to the wishes in your loved one’s Will because they already have designated beneficiaries on file.  As outlined above, the checking and brokerage accounts that Bill holds list Patty as a joint owner of the accounts.  As a result, when Bill passes away, said account automatically become Patty’s.  Bill also owns a MetLife Insurance Policy that names John and Sally, as equal beneficiaries.  Once Bill passes away, John and Sally are now entitled to equally split the insurance proceeds.  This same logic also applies to other accounts that may contain a beneficiary designation (i.e. individual retirement accounts, annuities, etc.).

This is merely one example of many that display the shortcomings of “do it yourself” planning. A proper estate plan will always include a detailed review of one’s assets in order to determine that all assets are going be distributed to whomever you intend. DIY planning may provide you with some documents, however, the documents themselves are NOT a guarantee that your plan is efficient and complete.

3. Not investing in estate planning at all.

This one is pretty self-explanatory. You’ve spent your entire life building your assets and investing in yourself. You’ve likely worked 40 hours per week, 5 days week for the majority of your lifetime in order to ensure that you can provide an amazing life for yourself as well as your family. Given all of the hours that you’ve spent earning, I urge everyone to spend 30 minutes (yes, that’s all that it takes) with an estate planning attorney. In that short period of time, you can ensure your earnings are distributed to your loved ones and that they are protected from long term care costs that may be incurred in the future.

Give us 30 minutes; we’ll give you peace of mind.

If you or a family member are interested in discussing estate planning with an attorney, please feel free to contact our office in order to schedule your initial, free consultation. We strive to provide convenient and affordable estate planning, no matter your age. You should be busy enjoying life, not wondering about the ‘what ifs.’

Related Topics: Estate Planning

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