At Scott C. Soady, A Professional Corporation, we frequently see clients who have made estate planning mistakes. Sometimes we are able to correct those and sometimes, unfortunately, it is too late. Here are some of the most common estate planning mistakes:
1. Not having an estate plan at all. Probably the biggest mistake you can make is not creating either a will or a trust. Not having a will, or preferably a trust, causes your heirs to have to probate your estate and distribute your assets according to the laws of intestacy set forth in the California Probate Code. This means that if you were intending to leave something to someone not your heir such as a friend, charity, or domestic partner, that will not occur. Also the process of probate is time consuming and can be expensive as attorneys fees are statutory.
2. Creating a revocable living trust but failing to put all your assets in the name of the trust. Another common mistake is not titling all your trust assets in the name of the trust. People go to the trouble to create a trust but then open a new bank account, buy a new property, acquire a timeshare, or another new asset and fail to title that asset in the name of the trust.
3. Not including provisions for guardianship for minor children. If you have minor children you should nominate guardian for them in your will or in a nomination of guardians that goes with your trust. Without a nomination, if something happens to you, the Court will not know what your preference is for a guardian. Also if you have minor children, you should consider putting provisions in your trust so that if the children do receive an inheritance before they are eighteen, it can be held in trust for them and even distributed over time intervals, rather than receiving it all at once.
4. Not including provisions for special needs beneficiaries. If you have potential beneficiaries that are on public assistance, receiving an inheritance can cause them to lose their benefits. You can, however, create a special needs trust which will allow the funds inherited to be placed in a trust for their use without affecting their eligibility for public benefits.
5. Not including business planning for your business. If you have a business or a medical or law practice, you need to plan for what will happen to your business after your death or upon your incapacity. Will it be sold or distributed to a family member who will continue to operate it? This aspect of estate planning is just as important as your personal estate plan.
6. Not updating beneficiaries on life insurance policies or retirement assets. If you become divorced, you need to remember to update the beneficiaries of life insurance policies and retirement assets if you don’t want your ex-spouse to receive those proceeds upon your death. Also if an existing beneficiary predeceases you, you want to make sure you have other beneficiaries named.
7. Doing your estate plan yourself. Estate planning is an important and complex task that only in the rarest of cases should be done by a layman. Estate law and tax law are constantly changing. An experienced estate planning attorney can call your attention to aspects of estate planning you never thought of. It is not an area that lends itself to “do it yourself.”