For most people, estate planning doesn’t have to be complicated or expensive. With a little time and focus, you can complete it faster and for far less money than you probably imagine.
Yet with so much on the line - your family’s future and everything you’ve worked a lifetime to build - it’s one of the most important things you’ll ever do. When it’s done well, estate planning gives you the deep satisfaction and peace of mind that comes from knowing you’ve truly protected the people you love most.
Do it wrong, however, and you can make one or more of the top ten estate-planning mistakes.
Here are the top ten estate planning mistakes.
If you are so old that you can barely walk and can't hear, it's not too late, but it's almost too late to do your estate planning. If you are physically and especially mentally weak, you are vulnerable to undue influence. Others can take advantage of you without you realizing it. And a discerning estate planning attorney may be unable to help you prepare your estate plan due to concerns about your ability to communicate, think clearly, and understand the process.
Also, even though some law firms, like ours, will offer virtual estate planning, it often can't be done with older clients.
A holographic will is a handwritten will. If you do it correctly, it may work. Usually it doesn't. And in all cases, your estate will go through probate. And California probate is expensive and complicated.
You may say, screw it, I don't want to use an attorney, and I'm certainly not going to use online DIY wills and trust software because it's too complicated and probably won't work. But you're not John Wayne scrawling out your last wishes with your pencil stub on a cigarette paper before a shoot-out with the bad guys. You have the time and resources to carefully and effectively set up your estate plan.
If you go it alone, not only will your estate go through probate, but you will most likely fail to prepare other crucial estate planning documents you will need, such as a durable power of attorney, health care directive, and HIPAA.
The whole point of estate planning is to have the documents in place so others can help you if you become incapacitated and so your wishes are carried out smoothly and efficiently when you pass away. Writing your last wishes by hand won't get you there.
If you have children, you will most likely name them as your beneficiaries. But if you don't have children, you will need to be more creative when choosing the beneficiaries of your living trust. Many of our clients in that situation will name friends and charities as beneficiaries. But some feel obligated to name family members, even those like nieces and nephews with whom they have no relationship.
The problem with naming individuals you barely know as beneficiaries is that you can't tell how they will react to their inheritance. If they are grateful, that's a good result. But if they are greedy and demanding and make life difficult for your successor trustee, that's a bad result.
Despite what many believe, there is no rule that says you have to leave your hard-earned assets to your selfish nephew because he's your only remaining family member. Better to leave your assets to your friends, favorite charity, co-workers, or neighbors - people or organizations you have a relationship with that you know will be appreciative and thankful.
The estate you leave to others is a blessing. Bless the ones who will appreciate it.
When you name the successor trustees of your living trust, you need to consider whether the trustee will be able to work with your beneficiaries. If there is tension between one or more of your beneficiaries and your trustee, you may want to reconsider your choice of trustee.
For example, it may not be an optimal situation to name your son's ex-wife as trustee when you have named your son as a beneficiary of your living trust. If he still harbors a grudge against her, naming her as the trustee could add fuel to the fire and make what should have been a smooth and efficient trust administration a nightmare for the trustee and your other beneficiaries.
FYI you don't have to name your oldest child as your successor trustee or executor. Instead, if you want to name one of your children in those roles, name the one with the talent stack to effectively do the job. The best trustees are honest, trustworthy, good communicators, and can get things done. Better that the unqualified oldest child feel pushed out of shape for not being named your trustee, than to have him fail in the trust administration.
Many years ago, we took on a case for two sisters whose father had died five years earlier. They engaged us to help them recover their share of their father's trust estate. Their oldest sister, whom their father had named as his successor trustee, distributed to them a small portion of their inheritance and kept the rest for herself. When we called her out and threatened to file a court action against her, she claimed she didn't know what she was supposed to do as trustee, so she did nothing - except deposit her father's money into her personal account. After some back-and-forth, she eventually paid her sisters their share.
Think carefully about who you name as your successor trustee.
Don't be California Senator Ralph Dills, who married his deceased wife's daughter.
Dills married his third wife, Elizabeth Ging Lee, in 1970. Ms. Lee had three children, two sons and a daughter. Dills adopted the sons, but not the daughter. When Elizabeth died in 2000, Dills, who had lost much of his mental capacity, allowed his deceased wife's daughter, Wendi Lewellen, to take care of him.
According to many reports, including an August 18, 2002, article in the San Francisco Chronicle, Dills' sons claimed Lewellen began to dress like their mother and even wore her perfume. They claimed she was trying to deceive their father into thinking she was his deceased wife - and it worked.
Dills married her, and as his wife, she became entitled to half of his estate. Read more here.
Using online estate planning platforms like LegalZoom, Nolo Press, or Trust and Wills might be okay if you have a small estate and don't own your home. But otherwise, you're rolling the dice. Are you making the correct choices on software, are you creating all the documents you need, and will the documents actually work when they need to work - if you become incapacitated and when you die.
Maybe it's better than nothing, but we rarely review a DIY software estate plan that will accomplish the desired result. Almost every time, we have to rewrite it from scratch to make it work.
We teach our clients that having a living trust is not enough to avoid probate. They must transfer title of their probatable assets to their trust.
Which assets are subject to probate in California?
Creating a living trust alone is not enough to avoid probate. You need to transfer title of your probatable assets to your trust. Usually, your estate planning attorney will take care of the real property transfer deeds and guide you on how to transfer your bank and investment accounts.
And as you acquire new assets, you need to transfer them to your trust.
Unfortunately, your estate plan is not a one-and-done effort. Your estate plan reflects your wishes for your family, beneficiaries, and your assets within the framework of the existing tax laws. Over time, your family, beneficiaries, assets, and tax laws will change, and your estate plan must keep up with those changes.
We all know that if you are already dead, it's too late. Since most of us don't know when we will die, but yet we know we will die, we recommend that you set up your estate plan sooner rather than later.