March 30, 2017

Avoid These 5 Estate Planning Blunders

Photo of Jerry E. ShilesPreparing an estate plan is not overly complicated. You meet with an estate planning attorney, discuss what you need, and the attorney prepares the plan. According to a post on CNBC.com, "Don't drop the ball when planning your estate," however, people who have cared for their families for decades often forget to plan for the care of loved ones after they’re gone.

Here are some common mistakes.

1. No estate plan.

A 2016 survey found that 64 percent of American adults don't have an estate plan. This failure to plan often results in assets going to people you didn’t want or in ways you didn’t intend. Creating a plan ensures your assets pass in the manner you wish.

At a minimum, a comprehensive estate plan should include the following:

  • HIPAA Release Form — Allows your medical providers to release information about your present health and prognosis to those with whom you want this information shared. If someone is not named in a HIPAA form or in a consent form you execute when you enter a medical facility, the facility may be unwilling to acknowledge to that person that you are even a patient there. 
  • Health Care Power of Attorney (HCPOA) — Authorizes your designated health care proxy to make medical decisions on your behalf when you are unable to do so.
  • Advance Directive for Health Care (Living Will) — Authorizes the termination of life support should you be deemed terminally ill, persistently unconscious or suffering from an end-stage condition (an irreversible and untreatable condition that will result in your death regardless of medical care).
  • Durable Power of Attorney for Finances and Property — Authorizes the agent you name to take care of your financial affairs (pay bills, sign contracts, deposit checks, etc.) during a period of incapacitation, whether mental or physical.
  • Last Will and Testament — After your death, it authorizes your personal representative, with the permission of the probate court, to administer and distribute your estate assets to the beneficiaries you have named.
  • Living Trust — In many states, it is common to use a living trust, whether revocable or irrevocable, to avoid the need for guardianship should you become incapacitated, and probate at your passing. Certain types of trusts can also provide some protection of your assets should you require long-term care.

2. Failure to review your plan

What if you have a plan but haven’t reviewed it in years? Many think plans never need to be changed. The reality is that lives change, assets change, we marry, divorce, adopt, and have grandkids. And the law changes. You should review your estate plan regularly to be sure it still works as intended.

3. Unfunded assets

If you have a trust, it is important for all your assets to be titled correctly. Bank accounts should be in the Trust name. Beneficiary designations for an IRA or insurance policy may need changing. Only you can ensure all your assets are protected.

4. Failure to update powers of attorney

Laws change and documents become stale or unaccepted when needed. If you want someone to make health care decisions or handle your affairs if you’re incapacitated, you need to be sure your powers of attorney (POAs) are kept current. Even then, some financial institutions will not accept your POA. Check with your institutions and be sure they will accept your POAs before a crisis occurs.

5. Unrealistic ideas about heirs

Are your heirs financially and emotionally able to handle responsibility? Are they sufficiently mature and financially astute or do they have issues — such as gambling or addiction — that can cause problems if you leave them large sums of money? Talk to a qualified estate planning or elder law attorney about how to protect their inheritances from themselves and others.

One more important thought. Stay in regular communication with your attorney. Laws and circumstances change over time and the attorney will help you identify needed changes and make sure your plan works as it should.