While it might seem simple enough to put together an estate plan online or have your tax attorney prepare your will, it can be very difficult to create an estate plan that works without the proper training and experience. What might seem like minor details to the inexperienced eye can often have major effects on your plan’s final outcome.
We regularly meet with clients who ask us to review an estate plan that they created online or with an attorney who isn’t experienced with estate planning. More often than not, clients who meet with us to review a DIY plan find out that instead of saving money on their estate plan, they’ve actually cost themselves much more by buying a plan that contains mistakes. And if these mistakes aren’t caught by you while you’re alive and well, your loved ones will be the ones paying the price to resolve them after you’re gone.
Here are the three biggest mistakes I see when reviewing DIY and low-cost estate plans:
Not Creating a Lifetime Asset Protection Trust
Creating a trust to hold your assets can provide years of asset protection for your loved ones, but that protection only exists so long as the assets are held in the name of the trust. The second big mistake I see are trusts that direct the assets to be taken out of the trust’s protection and given to your child or beneficiary at a specific age. You might not see the problem with this scenario at first, but even if your child or beneficiary is mature enough to manage a sum of money, doing this still leaves those assets susceptible to future legal and financial risks.
Instead, consider creating a Lifetime Asset Protection Trust to hold their beneficiaries’ assets indefinitely. This gives the assets lifelong protection while still providing financial support to your beneficiaries. This decision requires you to know the pros and cons of maintaining control over the assets. It might still make sense to distribute outright, but this decision should be made with the advantage of sound legal advice.
Unfortunately, most lawyers do not understand how to use trusts to establish this kind of protection for the inheritance you are leaving behind, and some may even try to dissuade you from using a trust at all unless you have a very large estate. Even if you are leaving behind a small number of assets, protecting those assets and helping them grow can make a huge difference in the future well-being of your loved ones.
Forgetting to Update Beneficiary Designations
This final mistake is so simple, yet so easily forgotten when creating a DIY plan or using an inexperienced estate planner. While your will and trust are important parts of your estate plan, it’s vital to update your insurance policies and retirement accounts to pay out to your trust instead of directly to your beneficiaries.
Leaving the names of your beneficiaries on your insurance and retirement accounts instead of the name of your trust ensures the largest assets you own won’t be a part of the plan you just created. Instead, the assets will be distributed directly to the beneficiaries listed on the account, to do with however they want, even if you had other plans for protecting the funds under your trust. We’ve even seen cases where the beneficiaries named on a life insurance or retirement account are so outdated that the person named on the account is an ex-spouse!
Estate Planning That Works
In order to make sure your estate plan truly work the way you intend it to, it’s essential that all of your assets are reviewed and accounted for to make sure that any accounts you have reflect the name of your trust or other estate plan method. That’s why we always create an inventory of your assets and follow up with you to make sure your assets are updated into the name of your trust. We can even update your assets for you, so you can rest assured that every piece of your plan works together.
If you're thinking about using a DIY estate planning service or had an estate plan created by an attorney in a different practice area, it's crucial to check your plan for these three simple but major mistakes. Otherwise, your estate plan might end up causing more problems than it solves, leaving your family in court and conflict.
When you meet with us, we’ll review your current estate plan, and you'll have the opportunity to discuss your concerns, learn how your current plan will (or won’t) work for you, and if you don’t feel confident in your current estate plan, we’ll create a new comprehensive plan for you that will provide the protection and support your family needs for years to come.
Don’t let a simple estate planning mistake derail your plans for your family. Contact us today - your loved ones will thank you for it!
This article is a service of Desmond Law, Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That's why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session™ and mention this article to find out how to get this $750 session at no charge.
The content is sourced from Personal Family Lawyer® for use by Personal Family Lawyer® firms, a source believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own separate from this educational material.