It takes a lifetime of hard work and planning to acquire the real estate, investments and other assets that lawyers refer to as a person’s estate. You might think that the last thing anyone would do is leave the distribution of an estate to the one-size-fits-all state intestacy laws, but that is exactly what 67% of Americans responding to a survey have done by not having an estate plan.
Apart from the foolishness of letting a state law dictate which of your relatives get to share in the distribution of your estate upon your death, not having an estate plan puts you at the mercy of courts to decide the type of medical treatment you receive when you are too sick to make those decisions for yourself. A meeting with an estate planning attorney ensures the orderly distribution of your estate according to your wishes upon your death. It also lets you designate someone that you trust to handle your financial affairs and make health care decisions when you are incapacitated and unable to do so on your own.
Estate plans come about through a collaboration with your attorney, but you need to be prepared by knowing what you want done. One way to get you started is by offering the following list of the five common estate planning mistakes and ways for you to avoid them.
Putting off estate planning until you’re older
Too many people think of end of life decisions and death as being so far off in the future that waiting to address them can wait at least until they reach retirement age or older. Unfortunately, life-altering accidents and illnesses happen at all stages in life.
Estate planning ensures that your wishes are known and will be followed regarding health care, end-of-life decisions, handling of your finances, and distribution of your estate. Consider how comforting it would be knowing that someone you trust has the legal authority to manage and look after your financial affairs should an illness or injury prevent you from doing so.
A durable power of attorney as part of an estate plan lets you designate an agent to handle business, financial and personal matters on your behalf. You specify the scope of the authority granted to the agent and can make it as broad or limited as you desire.
There is even a document, commonly known as a health care power of attorney, that lets you designate an agent with the authority to make decisions about medical care you receive should you be incapacitated and unable to make them on your own. However, the only way to get the benefits and peace of mind of powers of attorney or any other estate planning documents is to stop thinking about estate planning and make an appointment with your attorney to create one for yourself.
Failing to periodically review and update your estate plan
Life constantly changes, and your estate plan needs to be updated to keep up with all that goes on in your life. Some of the events in your life that signal the need for a change to an estate plan include:
- Marriage and divorce.
- Birth of a child.
- Purchase of a home.
- Start of a business.
- Death of close relatives.
An estate plan needs to be periodically reviewed to determine whether changes are needed to keep up with what’s going on in your life. For example, it may have been a good idea to name your spouse as the agent to make end-of-life and health care decisions for you, but a divorce may be a good time to have your health care power of attorney changed to designate someone else as the agent.
Planning only for your death
A common mistake in estate planning is to focus on death by including only a will and trust agreement in an estate plan without having a plan for living with a disabling illness or injury. According to the Social Security Administration, one-in-four 20 year olds can expect to be disabled before they reach retirement age.
An estate plan that includes only a will or trust agreement providing for distribution of your estate after death can easily be expanded to protect you in the event of a disabling illness or injury. A health care power of attorney, living will, and durable power of attorney are some of the documents your attorney may recommend to ensure that your affairs are managed according to your wishes while you are alive.
Letting emotion and loyalty get in the way
The person chosen to be executor of a will or the agent designated to act for you through a power of attorney must be someone who is capable of doing the job. The obvious decision may be to designate your spouse to make end-of-life decisions for you, but it may not be the right choice when you consider the types of decisions your spouse will be called upon to make.
The emotional bond between you that makes your spouse or one of your children the obvious choice could make it difficult for them to make tough decisions when the time comes. Choose someone who can set aside emotion and follow your wishes as you outlined them in your living will or health care power of attorney.
Adding children to the deed to your home to avoid probate
The rationale for changing ownership of your home by adding children to the deed is that doing so avoids the time and cost of probating a will when you die. Because they are named as owners on the deed, title automatically passes to them upon your death without the need for a will or probate proceedings.
Get advice from your estate planning lawyer before changing the deed to your home. Adding a child as an owner may have subject you to payment of gift taxes. It also makes your home an asset that creditors of your children could seize.
Transferring title to a trust may be a better option to pass the property to your children upon your death outside of probate without the risks associated with a transfer of title to them during your lifetime. Let your attorney advise you about the best way to accomplish your goal.
Make estate planning a priority early in life in the same way that you would planning for retirement. If you do not have an estate plan, make an appointment today with an estate planning attorney to get it done.