As a California estate planning and probate attorney I see both sides. I see the planning process and I see what happens, after death, when the planning wasn’t done right. Here is a top 10 list of estate planning mistakes:
10. Name your estate the beneficiary on your IRA, 401k, and other retirement plans. This is a great way of creating unnecessary tax and probate fees and costs. It also will delay the time when your family will have access to the money. Attorneys and the tax man will love you for it! Your family won’t be so happy with you though!
9. Name your estate the beneficiary on life insurance. Similar to above it creates unnecessary delay in access to the money and causes costs and fees. Your family won’t love you for this.
8. Name no beneficiary on your 401k and other retirement plan. In some cases the money will flow to your estate and create taxes, fees and costs as indicated at #10 above. However, some plans have a written list of heirs if no beneficiary is named and that list might be different than who you want to give the assets to!
7. Leave money to minor children or to your estate. By doing this your kids will get your money when they turn 18. They will love you! Also, the new car salesmen, car stereo salesmen, many other salesmen and also all of their friends will love you! Plus, your kids will love you for the 6 months it takes them to burn through your money.
6. Outsmart the tax man and add your kids onto your house as a joint tenant. Sure you might avoid attorney fees for a living trust but you might create a capital gains tax at death due to losing the full step up in basis. The IRS will love you for paying unnecessary tax.
5. If you have a safe deposit box don’t tell anybody about it. Just leave the key. The family will love the treasure hunt going bank to bank throughout town looking for it. Of course, if you move to a new town before dying that treasure hunt is totally fruitless and they probably won’t be so happy with you.
4. Don’t fully fund your trust. So many people go to the trouble and expense of creating a living trust but then they fail to put all the assets into their trust. This creates unnecessary probate fees and costs. Your attorney will love you!
3. If you re-finance your house do not put your house back into your trust. As above it creates an unnecessary probate and thus your family or loved ones will have to deal with the cost and delay of that. Again, your attorney will be appreciative!
2. Don’t use a certified specialist for your estate plan. It’s a great way of getting an inadequate estate plan. Sure you might, or might not, save a few bucks but….
1. Don’t have any written estate plan. It’s a sure way to cause problems and unnecessary money to be spent after death. If you want to really upset your family do nothing!
Really if you love your family avoid these 10 and hire a Certified Specialist in Estate Planning, Trust and Probate law as determined by the State Bar of California Board of Legal Specialization. Contact me with your questions. -John