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Estate Planning Mistakes to Avoid

Estate planning is an important process during which you’ll make all kinds of legal and financial decisions. These decisions can have serious consequences when it comes to retirement and long-term care planning, end-of-life medical care, legal guardianship of minor child, and – of course – what happens to your property when you pass on.

If you aren’t careful with your estate plan, you put yourself at risk of making a mistake that can cause your loved ones a lot of stress and heartache in the future. Fortunately, many of the mistakes people make are avoidable just by knowing what they are. The more information you have, the better prepared you can be to make a well-functioning estate plan for the future.

Now, let’s discuss some of the most common estate planning mistakes people make.

7 Common Estate Planning Mistakes

Although it doesn’t have to be, an estate plan can be complicated. With greater complexity comes a greater risk of making a mistake, but this shouldn’t deter you from planning. Invest some time in reviewing the information below and contact an estate planning attorney as soon as possible to help you plan for the future.

1. Not Planning at All

By far, the most common estate planning mistake that as many as 60% of U.S. adults are making right now is not having an estate plan at all – not even a will. If you don’t have basic arrangements in place when the time comes, it can wreak a lot of havoc for your family.

If you are incapacitated and on life support, for example, your loved ones will need to go to court and get a judge’s permission to make medical decisions on your behalf. Even if you are married, marriage in and of itself doesn’t give your spouse the power to make these decisions – only an advance health care directive can.

If you die without a will or trust, your property is subject to intestate succession. This is a probate process where California’s laws determine who your legal heirs are and how they will inherit your property. Generally speaking, most people wish to avoid this process and even probate altogether if they can.

2. Incorrectly Witnessing Legal Documents

Wills, powers of attorney, and other estate planning documents – except trusts – require witnessing under specific conditions. If these conditions aren’t met, the entire document and all of the arrangements within it can be challenged in court and invalidated.

It’s critically important to make sure all witnessing and notarization procedures are carried out properly. Wills, for example, must be signed at the same time by at least two people who are not the testator. Witnesses must also have the capacity to understand that they are signing the testator’s will.

3. Naming Only One Beneficiary

If you have a trust, it’s a mistake to name just one beneficiary. Why? Because the beneficiary might predecease you. If that happens, you’ll have to go through the trouble of naming another beneficiary, which can happen at an inconvenient time.

The best way to avoid this scenario is to name contingent beneficiaries. These are people who would inherit your property if the beneficiary ahead of them is deceased or otherwise unable to accept the property.

4. Not Funding a Trust

After establishing a trust, your attorney may or may not help you fund it. Funding a trust means titling assets and property to the trust, which then assumes ownership of these things. Proper funding allows your property to avoid probate, provides tax advantages, or otherwise puts the reason for forming the trust into effect.

If your trust isn’t properly funded, it remains part of your personal estate. This means that it will be subject to probate if you have a will or intestate succession if you don’t.

5. Failing to Consider Taxes

Without proper planning, taxes can crater what you intend to leave behind for your loved ones.

Estate tax liability fluctuates depending on the laws that are in effect. As of February 2022, federal estate tax liability triggers only for very large estates ($11.58 for an individual or $22.36 million for a married couple). If your estate exceeds this amount, you will owe federal estate tax.

Californians aren’t subject to state estate tax, but there may be other tax consequences that one should consider. For this reason, it’s best to consult with a professional estate planning attorney to learn more about your estate’s possible exposure to tax.

6. Never Updating Your Documents

Estate planning shouldn’t be a “one-and-done” event. It should be an ongoing process that takes change into account. What kind of change? Life events like births, deaths, marriages, divorces, purchasing real estate, receiving an inheritance, and filing for bankruptcy, to name a few.

Significant changes in your life more than likely call for some consideration for your estate plan. When you think about what’s new or different, ask yourself, “Should my estate plan take this into account?” If your answer is “yes,” then a modification may be appropriate.

7. Trying to Do All of This on Your Own

Although not the biggest mistake people make, trying to “DIY” an estate plan is second only to not having one at all. Although estate planning can look easy and you’ll find resources online that purport to show you how it’s done, there’s no substitute for professional legal guidance.

By hiring an estate planning attorney, you gain the experience and knowledge of someone who can apply their skills to meet your specific needs. No template you’ll find online can do that, but a dedicated legal representative can.

If you’re in need of estate planning assistance, our attorney at Nguyen Law Group can help. For more information, contact us online now!