At times, it can seem difficult to be prepared for everything potential problem in life because there are so many things we need to stay on top of. Updating auto insurance coverage in case you have an accident. Saving money for an emergency that may or may not come. Changing your oil every few thousand miles to keep your car from breaking down. The list is endless.
However, there’s one thing you can prepare for that you know is eventually going to happen: your death. We all hope it won’t happen for a long time, but it is absolutely unavoidable. Why, then, are so many people underprepared, or completely unprepared, when it comes to what will happen to their assets when they die?
One of the main reasons is that people are simply uncomfortable talking about death. Most people understand that it’s the right thing to do, but they keep putting it off and putting it off. Even famous and wealthy people, who are usually surrounded by financial and legal professionals and have a lot of assets. For example, when Prince died in 2016, he had no will in place for assets estimated to be worth approximately $200 million, leading to chaos and conflict among his relatives.
In my practice, I see these types of mistakes occur all the time. However, these are the most common ones that come across my desk:
Believing that a basic will or trust is all you need.
Even if you have a will, which indicates who gets your assets upon your death, that alone does not guarantee your estate will stay out of probate. And probate is not only expensive, every part of the process is in the public record. On the other hand, a revocable trust keeps all assets that are titled in the name of that trust out of probate and protects your family’s privacy.
Using an online, do-it-yourself estate planning service.
Online services like LegalZoom ask you a few vague, generic questions and then make recommendations on what you need. In the end, you are still responsible for executing the documents on your own. And if you don't do it the right way, like not having the papers properly witnessed and notarized, it's incredibly easy for your estate to end up in the probate process described above. Having an experienced professional attorney – someone who takes the time to get to know you and your circumstances thoroughly – create your will or trust may cost a little more, but it will save your family a lot of unnecessary stress while they grieve your loss.
Not funding a revocable trust.
Even after you’ve signed all the paperwork, a trust doesn't legally exist until it's holding assets. Too many people set up a trust, then never get around to re-titling their assets in the name of the trust. And it’s not just financial assets like bank and investment accounts. Homes and businesses can also be held in trust. Your attorney, financial planner, brokerage firm, mortgage company or bank can assist you with this.
Not revisiting your estate plan as your life’s circumstances change.
There are many life events that should trigger changes to your will or trust. The birth of a child or grandchild, for example, means you should pay a visit to your attorney because you may want to allocate your assets a little differently. Getting married or divorced is also a good reason to revisit your estate plan, as is the death of a relative who was listed either as an heir or trustee. You may even decide that you no longer trust someone you named as a trustee. Finally, there have been a lot of changes in the estate-tax exclusion amounts over the last few years, so it's a good idea to review your plan in light of those changes.
These are just some of the most common errors I see constantly in my practice. Sadly, I tend to see them after the family member has passed away and it's too late to do anything about it. At that point, my role is to help get them through the probate process as efficiently as possible. But I always think, “If they had just come to see me before they died, I could have saved them a lot of time, money, and anxiety.”