Common Mistakes to Avoid in Estate Planning PART 1

This is the first post in a two-part series on the most common estate planning mistakes.

Mistake #1: Creating a DIY or “fill-in-the-blank” estate plan

When you’re signing a legal document, one which will likely affect multiple generations in your family, determine how your legacy is remembered, and have far-reaching tax and other consequences, it’s probably best to go with the experts.

With a legal document preparation company, you’re paying for “attorney-drafted” legal documents that are treated like fill-in-the-blank worksheets. They guarantee that the document will be legally binding, but they cannot guarantee that nothing was missed. These companies assure their customers that “not everyone needs an attorney” and they can save you hundreds if not thousands of dollars, but this is not always the case.

An incomplete, improperly drafted estate plan runs the risk of:

  • Unnecessary attorneys’ fees
  • Unnecessary probate fees/costs
  • Higher taxes
  • Reassessment of property
  • Will contests
  • Family disagreements and hurt feelings

Mistake #2: Failing to understand your documents or their implications

 When you hire an estate planning attorney to create your plan for you, it’s part of their job to explain the basics of estate planning, the expected outcomes of your specific plan, and any possible issues and how to deal with them.

At the same time, as a client, you have a responsibility to ask questions and make sure you understand the answers. Please keep in mind that there’s no need for you to comprehend the specific “legalese” in your documents, but you do need to have an understanding of the big picture ideas and how they’ll affect your family in the long run.

Failure to understand one’s own estate plan documents is a big reason why some estate plans don’t serve the purposes they had originally been created to serve, and even end up in probate court—the decedent didn’t fully understand their responsibilities, especially after their trust was created.

When you receive your completed estate plan, if you have done your job by listening carefully, considering all the possible outcomes, asking for clarification when you need to, and actively participating in the creation of your plan, you will feel organized, prepared, and empowered to provide for your family.

Mistake #3: Leaving your trust unfunded and/or improperly titling your assets           

A living trust is “funded” when it owns something, like a piece of real property, a bank account, a business, or personal property. How does a living trust own something? By transferring title from the owner as an individual to the owner as trustee of his or her living trust.

Real property: If you own a piece of property and want that property to pass through your living trust after your death, you must always hold title to the property in the name of your trust. In California this is accomplished by recording a simple quitclaim deed, but every state is different.

Financial institutions accounts: The best practice here is to change the owner of your accounts to the name of your trust after you create your living trust. A close second-best practice to naming your trust as the owner on your financial institution accounts is to name your trust as the beneficiary of your account after your death. Every account you own now and in the future should be properly titled this way.

“Schedule A”: Most living trusts will have a “Schedule A” attached to the last page which lists the assets of the trust.

General Assignment: The “General Assignment” was introduced in 2016 following new case law that makes it even easier to avoid California probate court if, at your death, there was an asset that you failed to transfer into your trust. If you execute it correctly, this document proves your intent to avoid probate on specific assets and can be used by your family to seek confirmation of an improperly titled asset as part of your trust.

If you find yourself concerned or have questions about any of the scenarios mentioned above as they may apply to your family, consider meeting with an experienced estate planning attorney who can advise you on how to best avoid these mistakes and plan for your future with confidence.

Please check back next week to read our second post in this series with three more commonly made estate planning mistakes.

Happy Planning!

B.B.

The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship. Brittany Britton is licensed to practice law in the state of California only.

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