Avoid these elder law estate planning mistakes
Many times, the biggest mistake that people make is not creating a plan. A bad estate plan in Leawood is better than no plan at all. So, it makes a lot of sense to try and think of the very basics and get started. Once you start, you can create a plan in a very short amount of time, you can easily fix these problems later on. Don’t be overwhelmed to start; instead, just do some of the basics.
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Celebrity estate stories are rife with lessons about mistakes to avoid when creating an estate plan, such as problems with the estates of James Gandolfini, Philip Seymour Hoffman and Ernie Banks of the Chicago Cubs. Poor elder law estate planning may lead to probate, taxes and family disputes. Failure to create a comprehensive plan or drafting a poorly written plan may lead to many issues for your loved ones after you die that you could have avoided by proper pre-planning.
Research shows that about half of Americans do not have an estate plan. Many do not create a will, trust or other estate planning documents because they think they are too young or not rich enough to warrant a plan. A good elder law estate plan protects you during life through disability planning, in addition to passing assets to your loved ones when you die.
An elder law estate plan names people who will make medical, legal and financial decisions for you if you ever become incapacitated. Documents such as powers of attorney, health care proxies, living wills and trusts are part of disability planning.
An elder law estate plan names your beneficiaries when you die. Many people think a will is the most important estate planning document. However, trusts also name beneficiaries for the assets in the trust and avoid probate proceedings, which can be costly, may last a long time and possibly be contested. Wills do not avoid probate. Wills are probated if you die with assets in your name alone.
If you wish to disinherit a family member, it makes sense to consider using a trust rather than a will, to avoid family members contesting the will in court. If you have real estate in another state, you may transfer out-of-state property into your trust, and avoid two probates on death, one in New York and one in the other state. Wills do not avoid the “multiple probate problem.”
Some people think that owning assets jointly is a substitute for an elder law estate plan. With joint ownership, the right of survivorship means that if one owner dies the other person owns the property 100 percent. The survivor may leave the asset to their new love interest and completely leave out the beneficiaries agreed upon by the original joint owners. In addition, jointly held assets are not protected from long-term care costs. Instead, titling assets in the name of a trust can ensure the rightful beneficiary on the asset, especially if a neutral trustee is appointed on the first death. Certain trusts may also protect those assets from nursing home costs.
If you list “estate” as the beneficiary of an IRA, annuity or life insurance policy, a probate proceeding is guaranteed. “Estate” as a beneficiary means the asset goes through probate. Time, money and possibly taxes are saved if you name the actual beneficiaries on the beneficiary designation form. Also, if you pass away and name a minor as a beneficiary, a court proceeding is necessary. Again, trusts make more sense if you are naming a minor beneficiary so as to avoid an expensive court case.
Good intentions don’t necessarily ensure good outcomes in elder law estate planning. The legal, emotional and financial worst-case scenarios may easily be avoided with careful advance planning.
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