Having a well-drafted and comprehensive estate plan in place is one of the most meaningful gifts you can give to your loved ones and to yourself. Given the complex nature of estate planning, it can be easy to make mistakes that can prevent your plan from working as intended. Working with an experienced estate planning attorney is always the best way to prevent making mistakes. In addition, the Los Angeles attorneys at Schomer Estate & Wealth Advisors discuss seven common estate planning mistakes and how you can avoid making them.
- Procrastination: The most common estate planning mistake is not having an estate plan at all. Many people believe estate planning is only for the wealthy, but anyone with assets or dependents can benefit from having an estate plan in place. Without a plan, the state will effectively create a plan for you, meaning you will have no say in what happens to your assets.
- Failing to Update Your Estate Plan: Many people create an estate plan but fail to update it, leading to outdated or unintended provisions. For instance, an ex-spouse might inherit assets if your beneficiaries are not updated after a divorce. Life events, such as marriage, divorce, births, and deaths can make your initial estate plan obsolete which is why you should routinely update your plan.
- Overlooking the Importance of Beneficiary Designations: Beneficiary designations on assets like life insurance, retirement accounts, and annuities can override the instructions in your Will. Unfortunately, people often forget to review these designations when they open accounts or when they update their estate plans, resulting in unintended beneficiaries inheriting significant assets. To prevent this, keep your beneficiary designations current and coordinate them with the rest of your estate plan. When you review your Will or trust, remember to check beneficiary designations to ensure everything is as you intend.
- Not Planning for the Possibility of Incapacity: Estate planning should not just be about deciding who inherits your assets. It is also about ensuring that your wishes are respected if you become incapacitated. Failing to include documents like a Power of Attorney for finances and healthcare, or a Living Will, can leave your family with limited guidance if you are unable to make decisions for yourself. This oversight could also lead to expensive and contentious guardianship proceedings. To avoid these issues, ensure your estate plan includes these essential documents to give trusted individuals the authority to act on your behalf.
- Choosing the Wrong Fiduciaries: Selecting an Executor or Trustee is a critical decision given that this person will manage and distribute your assets. Choosing someone who lacks the skills, availability, or reliability to handle complex responsibilities can cause delays, errors, or even mismanagement. Often, people name close family members out of convenience or sentimentality, without considering whether they are truly up to the task. To avoid this mistake, choose someone with the competence and integrity needed for the role. Consider naming a professional fiduciary if warranted.
- Underestimating Estate Taxes and Costs: Even if you believe your estate is modest, underestimating taxes and administration costs can leave your heirs with less than you intended. In addition to federal estate taxes, many states impose their own estate or inheritance taxes, and some assets, like retirement accounts, are subject to income tax upon distribution. Furthermore, probate fees and court costs can reduce the value of your estate. To minimize these costs, consult an estate planning attorney who can help you explore options like trusts, gifting strategies, or charitable donations that can reduce or avoid taxes and other expenses.
- Ignoring the Potential Need for Long-Term Care: The average cost of long-term care in California was over $150,000 in 2023. As such, nursing home or assisted living costs can quickly deplete an estate, leaving little for heirs. Many people assume they will not need long-term care or that Medicare will cover all costs. Unfortunately, Medicare will not pay for LTC, nor will most health care policies. To protect your estate, consider options like long-term care insurance and talk to your estate planning attorney about incorporating Medicaid planning into your estate plan.
Can We Help You Avoid Making Estate Planning Mistakes?
For more information, please join us for an upcoming FREE seminar. If you are ready to create your estate plan and want to avoid making costly mistakes, contact the experienced Los Angeles estate planning attorneys at Schomer Estate & Wealth Advisors by calling (310) 337-7696 to schedule an appointment.
A graduate of Boston University School of Law, Scott P. Schomer is a frequent lecturer on estate planning and elder law issues, having discussed these important issues on local and national television. A seasoned courtroom advocate, Scott has obtained combined judgments and verdicts in excess of twenty-five million dollars for his clients. Read More!
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