What is estate planning? What are the pitfalls?

There are many choices but not all lead where you want to go.

Estate planning has historically referred to succession planning... or in other words using legal documents to determine who your heirs are and who gets what portion of your property after you pass away.

This process involves using "testamentary" documents such as a Last Will and Testament or a Revocable Living Trust to name your heirs and provide a legal process by which they can claim their share of your estate.

The simple definition has been complicated, however, by the need to provide intervention documents while you are still living but incapacitated, the need for a legal structure to hold your wealth (to be tax efficient), and the need for asset protection.

In short, estate planning can be very, very simple or extremely complex depending on your individual needs. Involving an experienced and professional attorney is highly, highly recommended.

Common Pitfalls In Estate Planning And How To Avoid Them

Estate planning is fraught with complexities that can lead to significant legal and financial pitfalls if not navigated carefully.

NO PLAN: By far, the most common mistake is not taking estate planning seriously. Failure to implement a plan leads to expensive court proceedings, family disputes and substantial delays for the heirs. Failure to provide disability type documents can result in expensive and annoying guardianship proceedings and chaos in administration.

NO UPDATES: Another common misstep many individuals make is not updating their estate plan regularly to reflect life changes, such as marriage, divorce, the birth of a child, or the acquisition of significant assets. This oversight can result in outdated directives that no longer align with the individual’s wishes or fail to account for new members of the family, potentially leading to legal disputes among heirs. To avoid this pitfall, it’s advisable to review and update your estate plan at regular intervals or after any major life event.

IMPROPER FUNDING: Another notable challenge is the failure to properly title assets or designate beneficiaries, which can disrupt the intended distribution of the estate. Assets that are not correctly titled or that lack beneficiary designations may not pass according to the terms of a will or trust, instead falling subject to the often onerous and time-consuming process of probate. This can not only delay the distribution of assets but also result in unintended tax repercussions and additional legal expenses.

PROBLEMATIC FIDUCIARIES: Lastly, designating someone to a position of responsibility who is not trustworthy is a major mistake. A properly drafted document can help to mitigate this risk by clearly laying out power of attorney, trustee or executor responsibilities. Exceptional documents may provide for oversight and removal/replacement if a fiduciary is not acting appropriately. Failure to do this may result in substantial loss to your heirs as an untrustworthy fiduciary can misappropriate or mismanage estate assets for their own benefit or simply in a disastrous manner.

In conclusion, navigating the complex landscape of estate planning can be a challenging endeavor filled with potential pitfalls. However, by being informed about common mistakes and adopting proven strategies to avoid them, individuals can ensure their estate is managed and distributed according to their wishes. Diligence, along with seeking professional advice when necessary, empowers individuals to create a robust estate plan that stands the test of time, providing peace of mind to them and their loved ones. Remember, successful estate planning is not a one-time event but an ongoing process that requires regular review and adjustments to adapt to life’s inevitable changes.

Curry Andrews, Attorney at Law