It’s common for folks to make serious errors in planning—or just not planning—to pass their wealth to their heirs after they die. CNBC’s “Don't drop the ball when planning your estate” gives us five of the most common estate planning mistakes that can hinder your ability to leave bequests in line with your desires.
- No will. A 2016 survey found that 64% of American adults don't have a will, and about half of these people either said they didn't need one or just haven't gotten around to it. Depending on the state in which you live and your personal situation, not having a will can result in assets going to people other than those you intend. A will is the document that states your wishes.
- No updated will. The good news is that you have a will; the bad news is that you haven’t reviewed it in a decade. You’re not alone. Many folks think their wills are “set-it-and-forget-it” documents that never need to be changed. However, our lives change. We marry, divorce, adopt children, have grandkids…the list is endless. You should review your will every two years.
- Unrealistic ideas about your heirs. When you draft your will, you should consider if your heirs are financially and emotionally able to handle the responsibility of money. They may not have the appropriate maturity and financial knowledge or may even have an addiction issue—any of which may be a serious problem when giving them a large sum of money. You should talk to an attorney about adding provisions in your will to protect them from their own issues.
- No trust documents. Wills help with the division of assets upon death, but trusts will live for a set period of time to regulate the distribution of assets. A trust can restrict the timing of asset distribution and add conditions for heirs to receive bequests—like the supervision of a pre-appointed trustee until a minor heir turns 18. Also, in California if you have an estate that is valued over $150,000 it will be subject to probate. Holding your assets in a trust can avoid probate.
- Not naming the right executor or trustee. Many people will opt for a relative or old friend in their wills as their trustee. However, they may be your contemporaries and may not outlive you. They also may not have the time or inclination to take on the responsibilities of an executorship. Plus, appointing a relative or family friend can increase the odds of friction between heirs. Instead, you might think about naming a professional executor or trustee.
You hear about websites that can set you up with a will. However, these “do-it-yourself” tools have lots of limitations, and you may never be aware that there’s an issue. Only your heirs eventually will discover this. This is a good reason to hire an experienced estate attorney to draft your will and help you update it periodically. Some people don’t want to spend the money, but it’s worth it—considering that your valuable assets may be misdirected without a professionally-crafted will.
One of the main goals of our law practice is to help families like yours plan for the safe, successful transfer of wealth to the next generation. Call our office today to schedule a time for us to sit down and talk about your estate plan, where we can identify the best strategies for you and your family to ensure your legacy of love and financial security. Our office is located in Santa Ana, CA but we serve all of California including Irvine, Orange, Tustin, Newport Beach, and Anaheim.
Reference: CNBC (September 13, 2016) “Don't drop the ball when planning your estate”