Some people think that estate planning is just for the rich.
Nothing could be further from the truth.
Your estate consists of everything you own, as well as your liabilities. If you want your assets to be distributed to your heirs in accordance with your wishes, you need to plan for that.
But estate planning experts say they see some mistakes all too often.
This is how a helpful article from the Dallas News begins. It goes on to outline some of the classic estate planning blunders that the attorneys in my firm see every day.
The first blunder is not knowing how much your estate is worth. This is critical information. Without it, you can't engage in any meaningful strategery (with a tip of the Stetson to former President George W. Bush) to preserve your estate from estate tax (which is the tax on the privilege of owning stuff when you die).
The second blunder is failing to update your estate plan. This is really a failure to recognize the universal rule that, over time, things change. The law changes. Your health changes. Your family and loved ones change. Your assets change. The list of people you like and trust changes. Your estate plan needs to take these changes into account. The only way to make sure this happens is to engage in a discipline of reviewing your estate plan on a regular basis (as we do with our clients through our Malama Ohana program).
A third blunder is leaving it all to your spouse. This may not sound so bad to your spouse, but it causes you to lose out on some opportunities to benefit both your spouse and your other loved ones, without sacrificing any benefits to your spouse.
Blunder #4 is thinking that joint tenancy will cure all your estate planning concerns. To be fair, joint tenancy can cure all of your estate planning concerns, but it does so by causing all of your assets to be sold out from under you so you don't own them any more. If you don't have an estate, your estate planning concerns are cured right? Well, no, not really.
There are two problems with joint tenancy. The first is that it opens up your assets to claims by the creditors of your joint owners. Let's say you put your two children on title to your house. All goes well for a while, until one of them gets divorced and the other gets sued. At the conclusion of the divorce and the lawsuit, you may have two people who now own interests in your house, either of whom could force it to be sold. You'll get your share of the sales proceeds, but they will not be enough to enable you to replace the house that you just lost.
The second problem with joint tenancy is it causes you to lose the opportunity to provide management and guidance for loved ones who might need it. Upon your death, title passes to the surviving joint tenants. If they are minors or are not mature enough to hold on to their shares, the property may soon be lost.
The final estate planning blunder this article addresses is the problem of picking the wrong decisionmakers. Perhaps the most important choice you make in connection with your estate plan is the choice of who will step in and make decisions about your health care and your property if you are unable. The law makes default determinations about who those people should be, but those defaults may not result in the appointment of the person who would be your first choice. So one mistake would be not taking the affirmative step of naming your hand-picked decisionmakers in your estate planning documents.
A second mistake would be naming someone who is not ready or qualified for the job. You need to let your head guide you here, and not your heart. For instance, many people want the decisionmaker to be their oldest son. However, sometimes, the oldest son is not the most qualified person to handle important decisions. So take your time in sifting through your choices, and and don't be afraid to think outside the box in coming up with the optimum decisionmakers.