Urology Times Money Matters: Estate Planning mistakes to avoid

A colleague shared with me that they created their own estate plan on a website vs using an attorney. Is that a good idea?

Jeff Witz, CFP

Having a good estate plan can be critical to ensure your family is well taken care of after you are gone. Although the quality of online tools continues to improve at a good pace, working with an experienced estate planning attorney remains the best way to ensure assets are distributed according to your wishes and in the most tax-efficient way possible. The drawback to using an attorney is often the cost, as some can charge a significant amount of money for their services. Sometimes people attempt to make an estate plan online without consulting legal and financial professionals to avoid the higher cost. However, everyone’s situation is unique, and using a boilerplate estate plan can lead to mistakes.

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Having an outdated estate plan.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, so it’s a good idea to review your estate plan at least once a year. For instance, if any of the following life changes occur, your estate plan should be modified accordingly:

• Your parents have died, so they can no longer be beneficiaries.

• Your children have gotten married and/or had children of their own.

• You have divorced and/or remarried.

• Your assets have grown or decreased significantly.

• You no longer own a home or you purchased additional property.

Failing to revise your will. For many of the same reasons listed above, make sure the will you drafted many years ago is still applicable. 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 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 actually avoids probate only 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, additional residence, 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 all individual retirement accounts, employer-provided retirement plans, and other qualified accounts. Take time annually to review the beneficiary designations as they will control the distribution of those assets.

Not naming successor or contingent beneficiaries. Let’s say you name 1 beneficiary on an account and that individual dies. If you do not update the beneficiary designation, there will be no successor to receive the account assets upon your death. It is important to name more than 1 beneficiary on accounts and to keep your designations up to date when named beneficiaries pre-decease you.

Failing to name a person to make health care decisions. 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 1 of these legal documents, designate someone you trust to make sure your wishes are carried out.

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.

Having a good estate plan is critical and some of these issues can be complex. Going it alone creates opportunities for missteps. Speak with your estate planning expert to ensure you have a proper estate plan in place so that your heirs are taken care of in the way you intend.

The information in this column is designed to be authoritative. The publisher is not engaged in rendering legal, investment, or tax advice. If you would like assistance with your individual investment strategy, please email witz@mediqus.com.