Matthew N. Schmidt
3 COMMON ESTATE PLANNING MISTAKES (And How to Avoid Them)
Updated: Oct 7, 2020
Merriam-Webster’s legal dictionary defines “estate planning” as: “the arranging for the disposition and management of one's estate at death through the use of wills, trusts, insurance policies, and other devices.”
Estate planning involves more than preparing a Will or deciding whether you need a Trust Agreement. Tackling estate planning without the assistance of an experienced estate planning attorney can lead to mistakes that affect your heirs and beneficiaries after your death.
Here are a few of the mistakes we want to help our clients avoid:
1. BELIEVING A WILL AVOIDS THE NEED FOR PROBATE
The probate process serves the purpose of providing documentation to satisfy various institutions holding a deceased person’s assets to ensure the institution relinquishes the property to the right person, and it gives creditors an opportunity to come forward with their claims. However, the probate process is costly (court costs and attorney’s fees) and a hassle for the deceased’s children or other heirs who have to navigate the process and deadlines prescribed by law before property can be legally distributed to those the decedent intended to receive it. The probate process can be avoided with careful estate planning.
A Trust Agreement does not have to be complicated. It can be kept simple while still being the most flexible instrument to achieve estate planning goals. Nonprobate transfers can also be utilized, as discussed in our recent NonProbate Transfers blog post.
2. NAMING THE WRONG (OR THE SAME) PERSON IN ALL ESTATE PLANNING DOCUMENTS
Whom you name to make your financial decisions is not necessarily whom you should name to communicate your healthcare decisions.
The Trustee of your Trust should be someone you believe has the ability to manage your property after your death. Sometimes the best choice to fill that position is a Corporate Trustee, such as when the trust assets are significant or the trust estate is complicated. A Corporate Trustee can be named as a backup to an individual in the event the individual is unable or unwilling to serve when the time comes.
On the other hand, the person you name in your healthcare power of attorney should be someone you feel has strong enough fortitude to do what you would desire under the circumstances. It is important to consider whether it is appropriate to name a certain family member, knowing that some loved ones might be too emotional to carry out your healthcare wishes, such as disconnecting tube feedings, artificial hydration, and/or nutrition.
3. NOT FUNDING A TRUST
A perfectly drafted and executed Trust Agreement is not fully beneficial unless the Trust is properly funded.
Assets owned by the creators of the Trust must be transferred into the Trust or otherwise titled in order to avoid probate. Some law firms simply advise clients that their Trust needs to be funded but do not assist them with any of the actual work of funding the Trust. Ensuring current and future assets are transferred or titled in the Trust is key; at Schmidt Kirby & Sullivan, P.C. we take this task seriously and have staff dedicated to assisting our clients with all necessary transfer work.
If you have questions about any of this information or would like help in starting your own estate planning process, please contact Schmidt, Kirby & Sullivan, P.C. at (417) 882-2828.