People often buy into falsehoods or half-truths regarding estate planning. In many cases, they make mistakes, and their loved ones have to pay the price eventually.
If you understand where these potholes are located, you can take the appropriate steps to steer clear of them. With this in mind, we will take a look at three different estate planning traps in this post.
DIY Estate Planning
There are websites that sell legal documents including last wills, and they want you to believe that it is easy for you to plan your own estate. You simply buy the download, fill in the blanks, and you are good to go. No further action is necessary.
This overly simplistic approach is a good example of Swiss cheese logic. It is possible to create a valid will by yourself. However, even if it is legally binding, you can make mistakes that yield unintended negative consequences.
A while back, the highly respected magazine and website Consumer Reports decided to put the subject of do-it-yourself estate planning under the microscope. Three people on their staff created wills using tools that were provided by three of the major online purveyors of legal documents.
They used hypothetical circumstances that would be typical for an ordinary person. After the documents were completed, they were given to a trio of prominent legal professors. The esteemed educators were unimpressed, and they provided a lot of negative feedback about the documents.
At the end of the experiment, Consumer Reports advised readers to steer clear of DIY estate planning “solutions.” You would do well to heed this advice.
Blindly Using a Simple Will
Far too many people assume that a will is the only estate planning document you can use unless you are extremely wealthy. In fact, nothing could be further from the truth.
There are many different types of trust, and some of them would not be appropriate for multimillionaires. A device that fits into this category is the revocable living trust. This is the estate planning tool that is the best choice for the widest range of people.
If you use a will, you would be allowing for lump sum inheritances. Additionally, it would take about eight months to a year for the bequests to be distributed. The probate process is expensive, and anyone that wants to find out how the assets were distributed can obtain the records.
On the other hand, if you use a living trust, you could choose to arrange for the beneficiaries to receive limited distributions over an extended period of time. There would be no long waiting game, and the streamlined estate administration dynamic would be very efficient.
This is just an example of one of several different types of trusts that can be a better choice than a last will depending on the circumstances.
Failure to Address Incapacity
Many elders become unable to handle their own affairs at some point in time due to dementia or for some other condition. And of course, there are patients that recover that are unable to communicate temporarily while they are battling difficult health conditions.
With the above in mind, a well-constructed estate plan should include an incapacity planning component. One document that should be part of the plan is a living will, which is used to state life-support preferences.
You can name a representative to make medical decisions on your behalf through the execution of a durable power of attorney for health care. To account for financial decision-making, you can add a durable power of attorney for property.
Let’s Get Started!
Now is the time for action if you do not have a professionally prepared estate plan in place. You can schedule a consultation at our Tulsa, OK estate planning office if you give us a call at 918-615-2700. The number for our Oklahoma City location is 405-843-6100. You can also use our contact form to send us a message.
After helping his own family deal with a lengthy probate and the IRS following his father’s untimely death in a farm accident, Larry Parman made a decision to help families create effective estate plans designed to reduce taxes, minimize legal interference with the transfer of assets to one’s heirs, and protect his clients’ assets from predators and creditors.