What Are the Most Common Estate Planning Mistakes?
For many, the thought of meeting with an estate planning attorney is overwhelming. This face, in conjunction with the ease with which you can find estate planning resources online, has increased the number of people implementing DIY estate planning solutions. However, the estate planning process is vital, and a single error can jeopardize an entire plan. Thus, it is essential for anyone who is considering tackling the estate planning process on their own to understand both what is at risk and the most common estate planning errors.
Below is a list of some estate planning errors that are easy to make and can carry severe consequences.
Failing to Update Your Will When Your Estate Plan Circumstances Change
Estate planning is not static. Your estate plan reflects your intentions and priorities when you create it. Thus, if your life circumstances change, so should your estate plan. For example, events such as divorce, bankruptcy, the sale of a business, retirement, lawsuits, or the inheritance of a substantial sum of money all carry estate planning consequences. It is essential to update your estate plan whenever the situation demands it. Failure to do so could result in assets unnecessarily needing to pass through probate—or worse—ending up where you didn’t intend.
Failing to Update Joint Account Holders and Beneficiaries
Adding a joint account holder or naming a beneficiary are the easiest ways to pass on assets. In either case, the total balance of an account will pass on to the joint owner or beneficiary without needing to pass through probate. However, if a joint account holder or beneficiary predeceases you, account assets will get lumped into your estate by default. This can have severe repercussions because chances are your will didn’t address the assets. Thus, the assets may get lumped together with your residual estate or pass through the state’s intestate laws, depending on whether you drafted a will.
Forgetting to Fund Trusts
Trusts are one of the most helpful estate planning tools. When properly used, a trust allows you to reduce the assets which must pass through the probate process and, in some cases, to avoid or reduce the imposition of the estate tax. However, creating a trust is only the first step; you must also fund the trust by transferring assets into the trust. Failing to do so eliminates any benefit the trust would otherwise have provided.
Mixing Up Probate and Non-Probate Assets
By default, most assets must pass through probate. However, certain assets are automatically transferred to another person upon death. For example, funds in a bank account with a joint account holder, jointly-owned real estate, and retirement account funds. However, it is essential that you do not include these assets in your will, as they are not technically a part of your estate. If a will conflicts with a beneficiary designation, the beneficiary designation will trump. For example, assume you have a bank account with $100,000, and you named your son a joint account holder. Upon your death, your son would automatically own the assets in the account. Even if you included a term in your will, your son wouldn’t necessarily be obligated to follow through with your wishes.
If you are considering beginning the estate planning process or have questions about an existing estate plan, contact the experienced attorneys at Hazen Law Group. We provide clients in Harrisburg and surrounding communities with guidance in elder law, special needs law, and estate planning. Marielle Hazen, the founder of Hazen Law Group, is a Certified Elder Law Attorney by the National Elder Law Foundation and has been named one of the top 50 women lawyers in Pennsylvania. To learn more and schedule a free consultation with one of our compassionate and knowledgeable attorneys, call 717-540-4332 today.
Other Frequently Asked Questions:
- Does Probate Administer All of The Decedent’s Property?
- How Can I Minimize The Taxes For My Estate?
- How Does A Living Trust Apply in Pennsylvania?
- How Does the Medicaid Look-Back Period Work?
- How Should I Plan For My Minor Children?
- Should You Discuss Your Estate Plans With Your Adult Children?
- What Are the Most Common Estate Planning Mistakes?
- What Is A Special Needs Trust?
- What Is A Spendthrift Trust?
- What Is A Will Contest?
- What Is Probate in Pennsylvania?
- What Is The Difference Between Medicare and Medicaid?
- What Is The Purpose of a Special Needs Trust?
- What Is The Simplified Probate Procedure For Small Estates in Pennsylvania?
- What Seniors Need to Know About Strategic Gifting
- What Taxes Will Apply to My Estate After My Death?