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Avoiding Common Estate Planning Mistakes

Bigstock-Urgent-Advice-Problem-Solving-53206399Knowing what the most common estate planning mistakes are is a great first step, but it does not do any good unless you also know how to avoid them.

The old saying that knowledge is power is only a half truth in many cases. You do not just need to know a fact. You also need to know how to use that fact to derive power.

This is the case in estate planning.

For example, you might know that it is desirable to avoid probate, but that is of little use unless you also know how to create an estate plan that will keep an estate out of probate. For the same reason it is important to not only know what common estate planning mistakes are but also to know how to avoid them.

A recent article by The Street entitled "How to Avoid the Most Common Estate Planning Mistake" discusses the most common mistakes and how to avoid them. Tips from the article include:

  • Updating Beneficiary Designations – People often fail to update the beneficiaries of their retirement accounts and life insurance policies, which leads to the wrong people getting the assets. Avoiding this mistake is as simple as filling out a form.
  • Communicating With Heirs – When your heirs do not know what to expect from your estate plan, it can lead to hurt feelings and anger. This can be avoided by telling people what to expect.
  • Creating Your Own Will – If you create your own will, you are likely to make mistakes in it. To avoid this problem, seek the assistance of an estate planning attorney.
  • Failing to Account for the Estate Tax – If you do not plan for the estate tax, then your estate might face a hefty bill that could have been avoided.

Fortunately, these potential miscues can be avoided by contacting a qualified estate planning attorney to guide you.

For more information about estate planning, please visit my estate planning website.

Reference: The Street (October 31, 2015) "How to Avoid the Most Common Estate Planning Mistake"

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Reforming a Will Because of a Mistake

Bigstock-Change-Improvement-Development-95453912A new decision by the Supreme Court of California has interesting implications for when a will can be reformed by the court.

Irving Duke created a "holographic" (i.e., hand written) will under which his wife was to receive all of his property. However, the will dictated that if Duke and his wife died at the same time, then his property was to be divided amongst various charities.

What Duke did not contemplate in his will is the possibility that his spouse would pass away before he did, which is exactly what happened.

As Duke had never redrafted his will after his wife passed away, the trial and appellate courts declared that his property should go to his relatives under the laws of intestacy. However, the California Supreme Court ruled that an unambiguous will can be reformed by the court if it can be established by clear and convincing evidence that a mistake was made in expressing the testator's intent at the time the will was drafted.

The Wills, Trusts & Estates Prof Blog reported on this case in "Unambiguous Will May Be Reformed Because Of Mistake."

This means that if the charities can establish that Duke clearly meant for his property to go to them in the event his wife was not able to inherit it, then the court can effectively rewrite the will to make that clear and the charities would inherit Duke's property.

It is difficult to determine what a deceased person intended to do.

While it might seem clear that Duke intended his property to either go to his wife or to the charities, it could also be the case that he intended to rewrite his will if his wife did pass away before him.

Consequently, this is the reason courts have generally been unwilling to rewrite potentially mistaken wills. It now appears probate courts in California will need to determine what a deceased person intended when the will is silent on an issue.

If you have had changes in your life or in the lives of your loved ones, then do not delay that phone call to a qualified estate planning attorney to review and update your estate plan.

For more information about estate planning, please visit my estate planning website.

Reference: Wills, Trusts & Estates Prof Blog (October 23, 2015) "Unambiguous Will May Be Reformed Because Of Mistake."

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Types of Assets in Wealthy Estates

Bigstock-The-Way-To-Being-Wealthy-86254508Wealthy people can have all sorts of different assets. However, the majority of assets held by wealthy people when they pass away fall into a few basic categories.

For all of the attention it gets, a relatively small number of estates actually pay the federal estate tax. In 2014, fewer than 12,000 estate tax returns were filed with the IRS, and most of the estates that filed the returns did not owe any tax.

Thus, the estates that do pay the tax are those of the wealthiest of the wealthy in the country. By looking at the data on the returns where an estate tax was due it is possible to get an idea of what kind of assets wealthy people have.

As reported by the Wall Street Journal, in "When the Superrich Die, Here's What's in Their Wallets," the IRS has recently released that information for estate tax returns filed in 2014.

While the article breaks the data down into what the extremely wealthy few hold and what the just wealthy enough to pay the estate tax hold, there are things both groups have in common when they pass away.

Overwhelmingly, the most common asset is stock in publicly traded companies. The next most popular assets are closely held stock and bonds. Real estate, cash, retirement accounts and limited partnerships also make up a large percentage of the assets held by estates that are subject to the estate tax.

What this data reveals is that wealthy people have several different types of assets that need to be included in an estate plan.

It is important to treat each asset appropriately to limit the estate tax burden and to ensure that if any estate tax is owed, that the assets are liquid enough for the estate to pay it.

A qualified estate planning attorney can guide you through this process.

For more information about estate planning, please visit my estate planning website.

Reference: Wall Street Journal (October 30, 2015) "When the Superrich Die, Here's What's in Their Wallets"

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Guardianship Abuse Is Rampant

Bigstock-Female-hands-with-word-guardia-89442698Guardians are supposed to look after and protect the interests of their wards. Unfortunately, it has become all too common for guardians to take advantage of their wealthy elder wards.

The purpose of court appointed guardians is a simple and noble one. When a person is not competent to handle his or her own affairs, then a court can appoint a guardian to act on the person's behalf. The guardian is supposed to act selflessly and in the best interests of the ward.

However, as the Wall Street Journal reports, in "Abuses Plague Guardianship Systems Across the Country," the financial abuse of elderly people by guardians is rampant throughout the United States.

Court appointed guardians with no family relationship to the elderly wards too often act in their own interests and deplete the wealth of the wards.

This problem is mostly avoidable through estate planning. Part of a good estate plan is planning for end of life issues and getting a general durable power of attorney and a health care power of attorney. With those two documents, you can appoint someone you know and trust to look after your financial and medical affairs in case you are ever not competent to do so. Doing that can often make the appointment of a guardian unnecessary.

Even if a guardian is necessary, a court will likely appoint the person you have already designated as trustworthy whenever possible.

Do not fall victim to an abusive guardian.

Schedule an appointment with an estate planning attorney and get the documentation that you need to make your own decisions about who should look after your affairs if you are not able to do so.

For more information about estate planning, please visit my estate planning website.

Reference: Wall Street Journal (October 30, 2015) "Abuses Plague Guardianship Systems Across the Country"

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Not Having Children Does Not Mean You Do Not Need an Estate Plan

Bigstock-Perfect-Couple-88317566If you do not have any children, you might not think that you need to bother with having an estate plan. However, having an estate plan is often even more important for people without children than for people with children.

A common myth exists that the purpose of estate planning is to provide a way for a person's children to receive their inheritances. From this it follows that people who do not have children do not need to have an estate plan. Nothing could be further from the truth. Providing an inheritance for children is only one purpose of an estate plan, not the sole purpose or even the most important purpose.

As U.S. News & World Report points out in, "No Kids? You Still Need an Estate Plan," people without children need, at the very least, to have a will if they want to have a say in who gets their assets after they pass away.

People who pass away without a will are said to have died intestate. Every state has a law that determines who gets the assets of people who die intestate. The laws all operate similarly, in that the assets are given to the person's closest living relatives.

Under such law, those who have a spouse or children will have their assets given to that spouse or the children. If however you have no spouse or children, then your assets will be distributed to other relatives, depending on who is closest in line. Ultimately, if you have no living relatives that can be found, then the assets will be claimed by the government. The term for this is escheat.

So, the primary purpose of estate planning for most people is avoiding the laws of intestacy and deciding for yourself who will inherit from you.

Do not let the fact that you do not have children deter you from getting an estate plan. Contact a qualified estate planning attorney to help you design a custom plan for your unique circumstances.

For more information about estate planning, please visit my estate planning website.

Reference: U.S. News & World Report (October 14, 2015) "No Kids? You Still Need an Estate Plan"

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