A cornerstone of creating family success is proactive planning for the future. This includes working with experienced advisors, including estate planning attorneys, who can guide the family to making informed decisions. A recent article, “Top Estate Planning Mistakes Families Make—And How To Avoid Them,” from Forbes, advises readers to include thoughtful planning, organized financial records and estate planning to create a legacy to span generations.
The biggest mistake families make is not having an estate plan. The second biggest mistake is trying to create an estate plan without the help of an experienced estate planning attorney. Families often turn to an attorney who has helped with transactions, like buying a house or settling a homeowner’s insurance claim. However, this is a costly mistake. It’s like asking a podiatrist to perform brain surgery—they may be well-meaning. However, they don’t have the necessary experience and knowledge.
Disorganized financial and legal record-keeping leads to unnecessary estate planning and administration complications. Good record-keeping helps families make good decisions regarding spending and saving and makes estate planning more effective. For example, creating a budget for retirement without accurate information could lead a couple to overspend and run out of money or live so frugally that they don’t enjoy their retirement.
Financial records must be organized, so real estate, investment accounts, savings accounts, pensions, credit card debt, mortgages and personal property can be accurately valued. Creating a successful estate plan needs to include information on cash flow and spending to guide decisions on how assets will be distributed and what liquidity is needed.
Family wealth is not created by passing large assets to the next generation without restrictions. Long-term estate planning is needed to retain wealth. When large inheritances are passed on without planning or education, most of the money disappears by the second generation, and whatever’s left is usually gone by the third generation. The family’s wealth shouldn’t be viewed as a bank account to be depleted.
Trusts are often used in estate planning. However, a common mistake is to create a trust and then neglect to fund it. Sadly, we see this all the time with clients we have helped. Funding a trust involves moving assets into the trust’s ownership. Deeds, titles and financial accounts must be changed to identify the trust as the owner rather than the person who used to own the asset. At Beck, Lenox and Stolzer, we provide thorough instructions to our clients to do this themselves. Funding a trust must be completed to perform as desired.
Another top estate planning mistake is not maintaining an estate plan. Maintenance is just as important as the creation of the estate plan. Financial records and documents in the estate plan need to be kept up to date. If the estate executor dies, the will needs to be updated. If a guardian is named to raise minor children, which is done through a will, and the person moves away, a new guardian needs to be named in a revised will.
Estate plans also involve documents to protect the living. A Power of Attorney assigns another person the ability to manage financial and legal matters if a person is incapacitated by injury or illness. A Healthcare Power of Attorney is needed to have another person manage medical decisions. The name of this document varies by jurisdiction. However, without it, a family will need to go to court to be involved with a loved one’s medical care.
Estate planning can be viewed as organizing one’s life and planning for the future. It is a gift to loved ones and establishes a legacy of caring. To get peace of mind for yourself, as well as for your loved ones, schedule a free phone consultation with one of our attorneys today.
Reference: Forbes (Nov. 7, 2024) “Top Estate Planning Mistakes Families Make—And How To Avoid Them”
