When it comes to estate planning, ignorance is anything but bliss. Lots
of people are probably familiar with estate planning as a concept, but
do they understand just how important it is and do they even have plans
of their own in place?
If you can’t confidently answer basic questions like these, you’re
at risk of making a common estate planning mistake – or may have
already done so. The good news is that your estate plan isn’t necessarily
final until it needs to be executed. That means that if you’re reading
this and realize you need legal assistance, you still have time to talk
to a qualified and experienced estate planning attorney about your options.
Please take some time to read three the following five common estate planning
mistakes and consider whether you’re at risk and how you can better
protect yourself and your loved ones.
1. You Don’t Have a Real Plan
The first mistake most people make is not having a solid plan in place
or not having one at all. This is incredibly risky because not having
a will or trust leaves the division of your property up to the state’s
laws during probate when you pass away. Sometimes, your property can end
up in the hands of relatives you wouldn’t trust with it, and the
courts alone can determine who will assume guardianship of your minor children.
If you are at the end of your life, lacking Advanced Directives can leave
your doctors and loved ones in the dark about how you want to be medically
treated. How far should doctors go to save or preserve your life? Leaving
such choices up to your loved ones without your input can force them to
make difficult decisions without truly understanding what you would have wanted.
2. You’ve Never Updated Your Plan
Estate planning shouldn’t be seen as a one-and-done deal. Just as
you and your family grow and change over time, so too should your estate
plan flex with the ebbs and flows of life. You might want to consider
reviewing your estate plan on an annual or semi-annual basis, depending
upon how much life has changed recently. You should certainly revisit
your estate plan when you have new high-value assets (such as real estate)
or have experienced a change in your family dynamic (marriage, divorce,
births, and deaths).
By adjusting your plan with your life as you move on, you won’t have
to worry about losing sleep over making sure your loved ones are protected
should something happen to you.
3. You Haven’t Considered Long-Term Planning
Too many people don’t take long-term planning into account when it
comes to their estate plan. This kind of planning maps out how you’ll
be able to afford a nursing home or assisted living facility one day when
you are elderly and need this level of care.
Planning for this is important because it’s anything but cheap. In
California during 2021, the median monthly cost of a private room in a
nursing home can be anywhere between $10,000-$15,000 per month. If you
know you won’t be able to afford this kind of care with your savings
later on in life, you may need to consider a Medicaid eligibility plan.
4. You Don’t Attempt to Minimize Estate Taxes
The estate tax exemption can exempt a large portion of your estate from taxation after you pass
away. The current exemption is $11.58 million, which means the federal
government will ignore this portion of your estate before taxes kick in.
If your estate is well above this amount and you want to avoid taxation,
proper planning prepared by an estate planning can help.
5. You’re Trying to Do This All on Your Own
Perhaps the biggest mistake you could make, next to not having an estate
plan, is to try to come up with one all on your own. We can’t stress
enough how easy it can be to end up with unintended consequences if you
try to handle all of this without guidance from an estate planning attorney.
Minor slip-ups in the language of your trust, for example, could unnecessarily
expose your estate to punishing taxation.
At the end of the day, you risk leaving your family trying to pick up the
pieces and put everything together during probate. This can lead to strife
and conflict in the family, which may eventually lead to legal disputes
among loved ones.