Creating an estate plan can seem to many like an unpleasant chore. Reminders of a person’s mortality are rarely enjoyable, so many people put the task off for “later” — sometimes never getting around to doing it at all. Not creating an estate plan is just one of many common estate planning mistakes that cause problems after a person pass on.
Not Planning at All
One of the most prevalent estate planning mistakes is failing to create a plan. Some may avoid creating an estate plan because they do not want to face the subject of death. Others may believe the myth that estate planning is only for the very wealthy. However, if a person does not create an estate plan, then the state’s laws will determine the distribution of his or her assets, and it probably is not how the person would have done it, had he or she planned.
Additionally, a complete estate plan includes more than just instructions regarding distribution of property, it also includes life planning. A complete estate plan includes financial and health care powers of attorney, to appoint someone to make financial and medical decisions should disability occur. Failure to include this life planning in advance of incapacity typically results in requiring the probate court to appoint someone as Guardian and/or Conservator to manage the incapacitated person’s affairs.
Failing to Update
Keeping an existing estate plan up to date can be just as important as creating one. Estate plans need to change as people’s lives change. If a person does not regularly review his or her estate plan — especially after major life changes such as marriage, divorce, remarriage, childbirth or death of a family member — an out of date estate plan could cause problems. For example, if a person divorces and fails to change his or her will and the beneficiary designations on non-probate assets, the ex-spouse may inherit the estate, contrary to the person’s wishes.
Not Reducing the Taxable Estate
The more assets people have, the greater the possibility of having to pay estate taxes. People can take steps to reduce their estate tax obligations through a variety of ways, such as creating trusts, joint accounts and life insurance policies. People can also take advantage of the opportunity to give tax-free gifts while they are alive and tax-free transfers for medical and educational costs.
Foregoing Professional Advice
A number of websites and companies offer forms for people to make their own estate plans. However, these sites only offer the paperwork; they do not help a person review his or her financial situation and legal planning options to determine the best estate planning strategies. These sites will also not help a person navigate complex tax laws or alert them when these laws change.
If you do not have an estate plan or have not reviewed it recently, contact an experienced estate planning attorney who can help you manage your assets.
Written by Sanford (Sandy) J. Mall, JD, CELA, CAP, VA Accredited Attorney. Sandy is the founder and senior partner of Mall Malisow & Cooney, P.C – The Holistic ElderCare, Special Needs & Estate Planning Law Firm located in Farmington Hills, Michigan. Attorney Mall and his firm are Featured in ElderCareMatters.com – America’s National Directory of Elder Care / Senior Care Resources to help families plan for and deal with the issues of Aging.