Here’s an informative article by a friend, Steven M. Greenwood, about common mistakes in estate planning and how to avoid them.
There are a lot of mistakes your clients can make in estate planning. A lot.
Bad planning can result in your client failing to protect her children, surviving spouse, assets, and her business. It can ignite unnecessary conflicts between and pour on additional stress among a client’s surviving loved ones that are still grieving.
A Wall Street Journal article recently outlined their picks for the three most common estate planning mistakes. (http://tinyurl.com/oppg6tp)
We’ve chosen to add a fourth most common mistake to the list.
1. Absolutely Nothing
Let’s start with the biggest no-no: There is no estate plan to begin with. Regardless of whether your client has an estate value that surpasses the estate tax exemption rate when she dies, having basic estate plan documents is crucial.
The four cornerstones of any good estate plan include a will, a living will, medical power of attorney and financial power of attorney. To ensure your client’s wishes are upheld, these documents should be drafted by an attorney.
A trust can be a strong foundation for building on those cornerstones. Clients often mistakenly assume they don’t have enough money or property to require the creation of a trust. However, depending on its language and state laws, a trust can add layers of protection against creditors, divorce settlements of a client’s children, and unintentionally disinheriting children when a client’s surviving spouse remarries. Special needs trusts, credit shelter trusts, pet trusts, dynasty trusts – there are a myriad of protections that a trust can provide.
2. Dusty Documents
Maybe your client already has an estate plan in place – but she completed it years ago and hasn’t updated it. Since then, she accumulated additional assets, bought and sold property, and has even seen the arrival of grandchildren.
A client’s documents should be reviewed by an experienced estate planning attorney every few years and whenever there are any “life changes” in a client’s circumstances. Those can include a move, a marriage or a divorce, property transfers, the starting or sale of a business, a decline in a client’s health, the death of a spouse, and the addition of new children or other potential heirs.
We can’t emphasize this enough: When there is a significant life change, a client’s documents should be reviewed and likely updated.
3. Outdated Beneficiary Designations
A retirement plan beneficiary designation is one of the most often overlooked parts of anyone’s estate planning. Unlike other assets, retirement plans are not disbursed by a will or a trust. Instead, they are released based on the beneficiary forms on file with your client’s financial institution.
Too often, people neglect to update their retirement plan beneficiary designations when their originally identified beneficiary (usually a spouse) dies or they divorce. Sometimes, the financial institution is bought out by another, in which case your client should probably refile the beneficiary forms using the new company in case the original designation won’t carry over properly, the WSJ said.
And now, our choice for the fourth most common estate planning mistake:
4. No Plan to Pay for Long Term Care
Many clients willfully ignore that they are growing older and one day they may be unable to care for themselves physically. They especially don’t like to think about paying for medical care. Sticking their heads in the sand about this issue is a HUGE mistake.
A single room in a private nursing facility can cost thousands of dollars. That can quickly wipe out a single person’s or a couple’s life savings. If your clients haven’t put into place a strategy to protect their assets and their families from the costs of long term care, they are risking their quality of life in their most vulnerable years.
Now is the time meet with an experienced estate planning attorney with knowledge of elder law issues such as Medicaid planning, long term care insurance, and veterans aid and attendance benefits. Putting this sort of planning off for “someday” can have devastating results.
We hope this information was useful to you and helps you and other families. If you have a specific case or a question, don’t hesitate to call our office.
Ron Boyer Boyer Insurance Services 12121 Wilshire Blvd, #600 Los Angeles, CA 90025 O -310-440-0281 Fax – 310-440-0381 ronboyer@boyerinsurance.com