According to a recent study from the Center on Wealth and
Philanthropy at Boston College, an estimated $59 trillion will be transferred
from 93.6 million American estates between 2007 and 2061. However, there is far
less clarity about where those assets are going since those currently holding
them can't be bothered to update their estate planning documents or inform potential
beneficiaries about their plans. Even when a will or a trust is in place, it
isn't a given that the assets in it will be distributed smoothly. Attorneys and
financial advisers say that wills and trusts are legal minefields that can keep
families in courtrooms and at each other's throats for years if they aren't
administered properly. We spoke to a team of financial and legal experts about
estate planning and discovered that the following five estate planning mistakes
are among the most common.
1. Not accounting for
sibling rivalry. According to Nicholas Wooldridge, a Las Vegas
attorney, nine out of ten times, the people fighting over the estate end up in
worse financial shape, because they've given their attorneys a chunk of their
inheritance. If the deceased's children didn't get along while their parent was
alive, there is no reason to believe that parent's death will help patch things
up. Mela Garber, principal at Anchin, Block & Anchin and head of the firm's
trust and estates services group, notes that she's seen numerous examples of
sibling beneficiaries taking each other to court when the will or trust
distribution is unequal, usually because one of the children was closer to the deceased
parent than the other. The easiest way to remedy that situation is to discuss
estate plans with your children before you die, but that isn't always desired.
Garber notes that most of her clients, out of practicality, avoid that
conversation and say, "I'll be gone, it's not my problem." However
even a little explanation goes a long way.
2. Unexpected surprises. One of
the big issues I've seen and that is subject to litigation is the way that the
estate tax apportionment is either written in the will or omitted, Garber says.
This is typically an issue for high-income families, but it's a problem that
can also crop up if the deceased owned property whose value has increased
significantly during his lifespan (such as a brownstone in a suddenly popular
neighborhood or farmland in a fast-growing county). If unresolved, the estate
may be forced to sell bequeathed assets to cover estate tax. It also doesn't
help is the deceased leaves a large gift to someone before he or she dies and either
doesn't pay the gift tax or lets it eat away at his lifetime gift allowance.
List everyone who is part of your family, list your friends so there is no gray
area as to what your intent is so there's a clear understanding of why and
non-family member is getting this expression of your appreciation, Six says. If
the family dynamic is such that it is not conducive to a discussion ahead of
time, then it is dependent upon the client and advisers to make sure the
document delineates as much as possible why assets are distributed as they are.
3. Letting your plan lapse. Are
you forgetting certain details, like that divorce and remarriage or that son
you disinherited? They seem hard to miss, but they're easy to overlook when you
don't update your will for half decades at a time. When those big changes in
family life occur, not accounting for them in your estate planning leaves your
legacy up for grabs. If you thought a divorce, a remarriage or blending of
families was tough during life, the scrum that can follow after your death if
you don't address your specific wishes can be infinitely worse. You're going to
want to shift everything into a trust in this situation just to shield everyone
from potential legal repercussions and to make sure your assets go where you
want them to.
4. Co-trustees. Please don't do
this. Maybe you want your spouse or child to be part of the process. However,
if they don't have the time, patience and acumen to handle the responsibility
and liability that come with trusteeship, there's no need to name co-trustees
and add further stress to an already trying time in people's lives. The
two-headed approach may work in some situations, but there's a reason why most
teams only have one head coach or manager. These folks are employed to make
swift and decisive decisions. It's tough for a trustee to do so when he is
squabbling with a counterpart.
5. Undue influence. Yes, a
personal caregiver can look out for your loved one in their waning days and
take some of the responsibility off the family, but some caregivers can also
work their way into estate plans though less-than-honest means. The end of a
person's life is an incredibly fragile time for everyone involved, but
Wooldridge notes that shifting end-of-life care to one person opens the door to
elder abuse for personal gain. The solution to this problem, in Wooldridge's
view, is simple: If you care about your parents' assets, care about your
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