Too many families face courtrooms, loss of inheritance, uncertainty, and turmoil, even when their parents had some level of estate planning in place. This usually occurs when too much time has passed since the plan was set up, or the plan was not robust enough to begin with.
Make sure your parents' estate plan avoids these top 10 common major mistakes:
- No Incapacity and Long-Term Care Provisions. Estate plans must protect your parents not just in the case of death, but also in the case of incapacity. Otherwise, family members may be forced to go into court to get certain powers necessary to help their parents during an incapacity or dementia diagnosis.
- Using a Will instead of a Trust to pass assets. While a Will can direct a judge how assets should be distributed upon a death, it does not avoid your family still having to go through a long and expensive court process known as probate. Only a trust (or transfer on death designations for certain accounts) can avoid a probate process.
- Trust not fully funded. Many parents set up an estate plan but fail to re-title their assets into the name of their trust. This usually results in a mini probate having to be opened upon a parent's death that is still costly and time consuming.
- Incorrect beneficiary designation. Your parents may have life insurance policies or retirement accounts where they designated a beneficiary to receive the funds upon a parent's death, so it's important that the named beneficiary reflects who the parent wants and specifies what happens if the designated beneficiary predeceases the parent.
- Plan does not reflect your current wishes. Relationships change, people move, children are born, loved ones pass away—such is the circle of life. It's important to make sure that your parents' estate plan reflects the current times, and that their current wishes are reflected in the plan.
- Plan is using old laws: Capital Gains Issues. Many of our parents' estate plans were created using an outdated tax structure that can result in unnecessary costs. With a simple plan restructure, your parents can avoid massive tax consequences caused by outdated methods and old laws.
- Assets are left unprotected from creditors, predators, divorce & most importantly LONG-TERM CARE SPENDING. Parents have the option of protecting the money they leave behind for family members from any ill-intentioned third parties. With potential divorces, creditors, predators, and health challenges, it's important to evaluate if asset protection makes sense for your family.
- Illiquid Estate. This happens when families are forced to sell businesses or real properties to pay off debts or taxes or make distributions. This can be avoided by having enough cash on hand, life insurance, or giving the successor trustee power to create liquidity.
- Paperwork not organized or easily located. Nothing is more frustrating than knowing your parents have an estate plan, but not being able to locate it during an emergency. Make sure your parents' estate plan includes all the necessary documents and directives and is easily accessible by you when it's needed.
- Lost Legacy & Memories. Your parents are incredibly special to you and your family, and we know how much you would long to hear their voice or hear special families if they were no longer there. Ask you parents to record a legacy interview where they can talk on audio or video about what matters most.
If you really want to know if your parents' estate plan in up to date, simply ask them this: "Mom, Dad, if something were to happen to you today, are you confident that your estate plan would work just the way it needs to from beginning to end?" If the answer is no, it's time to get your parents' estate plan updated.
We warmly invite you to contact your trusted Orange County Estate Planning Attorney at the Meier Law Firm us at (949) 718-0420 to schedule an estate plan review today. We regularly update outdated or inadequate estate plans for California families and individuals and look forward to helping your family have peace of mind.