Common estate planning mistakes occur when the applicable laws are not understood or when care is not taken to consider contingent circumstances during the planning process. Estate plans are created to match a person’s unique needs and to ensure that his or her wishes will be carried out without unexpected consequences. If you are ready to create your estate plan and want help avoiding these common issues, consider contacting an experienced Arizona estate planning lawyer at Harrison Law, PLLC, by calling (480) 320-2310 to schedule a personal consultation.
What Is Estate Planning?
According to the American Bar Association, estate planning includes transferring a person’s property at death in addition to other personal matters and may involve tax planning. Planning an estate can include the creation of several documents, including the Last Will and Testament (will) and powers of attorney, to address any assets the person owns and wants to pass on to specific heirs. When managed well, estate planning can produce an effective blueprint for the management of personal and business affairs during a person’s life and an orderly and efficient transition upon his or her death. When managed poorly, estate planning can result in unnecessary hassle and expense with unintended and inequitable results.
The 7 Most Common Avoidable Estate Planning Mistakes
The kinds of mistakes that can cause problems with the intended performance of estate plans are not specific to estate size or monetary value. Many common estate planning mistakes are simply avoidable circumstances that may not arise immediately, events that should be recognized and addressed before problems can occur. The following seven common mistakes can hinder a smooth implementation of an estate plan:
- Putting off estate planning
- Doing it yourself to save money
- Not planning for contingencies
- Failing to plan for the special needs of beneficiaries
- Forgetting to keep the estate plan updated
- Not reviewing beneficiary designations on pay-on-death accounts
- Having an incomplete estate plan
Putting Off Estate Planning
Estate planning is sometimes thought of as death planning. Many people are understandably reluctant to contemplate the prospect of their own deaths. However, creating an estate plan serves more purposes than just transferring assets at death. A good estate plan will address financial and healthcare needs during periods of disability or incapacity as well as the disposition of assets in the event of a person’s death. The plan can contain provisions for the care of minor children and provide for contingencies based on individual circumstances, such as long-term care.
Doing It Yourself To Save Money
Estate planning templates may be available online or through a discounted vendor, but these sources cannot give legal advice. Simply filling out forms without understanding the legal consequences of the choices may not be in a person’s or his or her beneficiaries’ best interests.
One risk is that the language developed to describe general solutions may not properly address the specific issues that pertain to one person’s circumstances. An experienced estate planning attorney can describe the various options for transferring assets to minimize the potential tax liability to beneficiaries.
Not Planning for Contingencies
Sometimes, due to the time that passes after an estate plan is made, certain property is no longer owned or available to distribute to a beneficiary. Additionally, a beneficiary named in an estate plan may be deceased when the estate is distributed. The circumstances that existed at the time an estate plan was created may have changed significantly, making it difficult or impractical to fulfill the decedent’s last wishes.
According to the American Bar Association, “dispositive” language in a will is crucial for making sure that the will is legally enforceable after a person’s death because such language clearly indicates testamentary intent. For similar reasons, including language in an estate plan that provides alternatives for contingent events can help to avoid unintended situations that may need to be settled in court. One helpful solution is to name alternative beneficiaries and to make allowances in advance for the possibility of changing circumstances. Adding a clause that states the person’s intentions can help achieve the desired results in the event of unplanned circumstances.
Failing To Plan for the Special Needs of Beneficiaries
An estate plan should address the special needs of any beneficiary. Would an outright distribution disqualify a disabled beneficiary from receiving government benefits? Is a beneficiary dealing with a personal struggle that would deem a direct distribution of cash not advisable for his or her long-term welfare? A type of trust can be established as part of an estate plan to protect both the beneficiary and the inheritance. A knowledgeable attorney at Harrison Law, PLLC, may be able to help determine the needs of your beneficiaries so you can select a trust that will safeguard their interests.
Forgetting To Keep the Estate Plan Updated
Estate plans are not static documents that can be created and then forgotten. Even when they include plans for certain contingencies, they require periodic reviews and updates to remain current with the lives of the people who created them and any changes in the laws affecting them. The passage of time, which includes births, deaths, marriages, divorces, or any other life-altering event, may trigger the need to make changes to an existing estate plan. Regularly communicating with an estate planning attorney may help to avoid common estate planning mistakes that stem from allowing these important documents to lapse out of relevance.
Not Reviewing Beneficiary Designations on Pay-on-Death Accounts
An estate plan needs to coordinate beneficiary designations on all assets to conform to the intentions of its creator. A will only directs the disposition of property that is subject to probate. A trust only governs the property owned by the trustee. Assets like life insurance, bank accounts, investment accounts, and retirement accounts can be transferred directly to named beneficiaries upon the owner’s death and do not pass according to the provisions of either a will or a trust. If beneficiary designations are not reviewed and kept current, an estate plan may not accomplish the intended results.
Having an Incomplete Estate Plan
Estate plans only work as intended when they are properly executed. To put an estate plan in place, assets may need to be re-titled, documents may need to be filed, and names may need to be changed. When people do not fully understand what they need to do or how their estate plan works, they may not complete all changes necessary to accomplish their wishes.
How To Avoid Common Estate Planning Mistakes
Estate planning is good personal business planning. The process serves not only those who create the estate plan but also family members who may later face tough decisions under emotionally trying circumstances. A good estate plan incorporates financial and healthcare needs in the event of injury or illness, as well as death, and details a coordinated plan for the disposition of assets.
Contact an Arizona Estate Planning Attorney Today
Seeking assistance from an estate planning attorney can help a person avoid common estate planning mistakes and their unintended results. If you are ready to create or update your estate plan, consider contacting an experienced Arizona estate planning attorney at Harrison Law, PLLC, by calling (480) 320-2310 to schedule a consultation today.
© 2022 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved
This website and article have been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal or financial advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.
