Estate planning: Don’t make these mistakes

Here is a list of potential estate-planning mistakes you can help avoid with professional counseling.

A colleague told me he created his own estate plan on a website versus using an attorney. Is that a good idea?

Sometimes people attempt to make an estate plan without consulting legal and financial professionals. Mostly, this is because they may have a general understanding of estate planning and believe they can do it themselves without paying for professional services. Everyone is different, and a boilerplate form oftentimes is not sufficient. Here is a list of potential estate-planning mistakes you can help avoid with professional counseling.

Having an outdated estate plan. Your life and financial circumstances may change, and your estate plan should change accordingly. For instance:

Your parents may have died so they can no longer be beneficiaries.
Your children may have gotten married and had children of their own.
You may have divorced and remarried.
Your assets have grown (or decreased) significantly.
You no longer own a house or you purchased property.

Your estate plan should take these and other life changes into account. It's a good idea to review your plan at least once a year.

Failing to revise your will. The will you had drafted many years ago may no longer apply for the reasons listed above and others. Some people believe that if they scratch out a part of an old will, add information, and initial the document, it will be valid. This is never the case.

Relying only on joint tenancy to avoid probate. Many assets are transferred outside of wills. For example, assets titled in joint tenancy pass to the surviving joint tenant, not per the terms of your will. Many feel that you and your spouse should own a home as joint tenants to avoid probate. This move really only avoids probate on the first death. When the surviving spouse dies, the home will typically end up in probate.

Not coordinating a will and a trust. Creating a trust and transferring assets to it may help you avoid probate and save taxes. However, if you have a will and a trust, be sure the documents are aligned so your wishes will ultimately be carried out. If a will and a trust are not in agreement, delays and unnecessary costs may be incurred.

Titling assets incorrectly. You want your intentions to be carried out for all assets, including your primary residence, vacation home, bank accounts, brokerage accounts, retirement accounts, and even vehicles. Be sure to make beneficiary designations and properly title accounts. Designate a beneficiary (or beneficiaries) on individual retirement accounts, company retirement plans, and other accounts. Take time annually to review them as they will control the distribution of those assets.

Not naming successor or contingent beneficiaries. Let's say you name one beneficiary on an account and that individual dies. If you don't update the beneficiary designation, there will be no successor to receive the account assets upon your death. Therefore, it's important to name more than one beneficiary on accounts and to keep your designations up to date when named beneficiaries pre-decease you.

Also see: Tying the knot raises multiple financial issues

Failing to name a person to make health care decisions. You've probably heard about the nightmare that can occur when family members don't agree on what to do with a loved one on life support. All 50 states permit you to express your wishes as to medical treatment and to appoint someone to communicate for you in the event you become incapacitated. Depending on the state, these legal documents are known as living wills, medical directives, health care proxies, or advance health care directives. On one of these legal documents, designate someone you trust to follow your wishes.

Relying on outdated or stale financial powers of attorney. You may have selected someone to make financial decisions for you with a power of attorney. However, after you signed the document, your circumstances or your relationship with the person may have changed. Consult with an attorney about how to proceed.

These issues can be complex. Speak with your estate-planning adviser to help ensure you have a proper and solid estate plan so that your heirs are taken care of in the way you wish.

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Every month, The Conference Board, a not-for-profit global business organization, poses five questions to 5,000 U.S. households to gauge their views on the overall health of the U.S. economy, job growth, and consumer spending. The answers help form the Consumer Confidence Index. Although it’s important to see how confident Americans are relative to the economy, the index is considered a lagging indicator, meaning it doesn’t say what is going to happen in the future, but rather relates to what has already happened.

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Send your questions about estate planning, retirement, and investing to Joel M. Blau, CFP, c/o Urology Times, at UT@advanstar.com Questions of general interest will be chosen for publication. The information in this column is designed to be authoritative. The publisher is not engaged in rendering legal, investment, or tax advice.