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3 Easy-to-Overlook Estate Planning Considerations

People avoid Estate Planning, either because they never outgrew that teenage feeling of invincibility, or because they overestimate the complexity of the task. Yes, drafting your Estate Plan is one of the most important things you will ever do…but that doesn’t mean it’s hard. A good estate planning attorney will walk you step-by-step through the process, and help you build a robust plan that protects your assets now, and in the future. They will even work with you to ensure your plan remains up-to-date as you age, and as your life evolves. Their ability to do this, however, depends on your collaboration, which is why it helps if you’re aware of a few easy-to-overlook estate planning considerations.

3 Common Estate Planning Mistakes (And Why They Happen)

An Estate Plan is a living document that grows and changes as you grow and change. This means it requires updating every few years, at least, or any time a major event occurs. Most Estate Planning mistakes arise from forgetting to make necessary updates, or failing to do a comprehensive job when updates are made. Here’s how this can happen:

1. Forgetting to Update (All) Beneficiary Designations

When you write your Will, you designate beneficiaries of your assets. These are the people—usually your spouse, children, close family members and sometimes, friends—who will inherit your money, property, and other belongings when you die.

A Will is not the only Estate Planning document that includes beneficiary designations, however, called “Will Alternatives”.  Your health insurance policy and retirement accounts, for instance, also include beneficiaries, and a person named in either of these documents supersedes a named beneficiary in a Will. This means that, yes, if your sister—with whom you’ve since had a major falling out—is named as beneficiary of your Roth IRA, she will be getting the money…even if you updated your Will and removed her name from there before you died. Why?  Because Will Alternatives will trump your Will 24/7.

2. Overlooking Out-of-State Assets

Estate legislation varies by state, so whenever you move, you need to update your Estate Plan. If you had the foresight to execute an Estate Plan, you probably also have the foresight to update it after a significant move. Even so, it’s easy to forget to account for assets that haven’t moved with you, or which were never in your home state in the first place.

Does your family keep a vacation home on the coast? Did you inherit your mariner-grandfather’s yacht? Real estate or tangible property located outside of your state of residence is subject to ancillary probate and, if you know anything about estate planning, you know probate is a headache. And, with real property in another state from where you reside, this means two probate proceedings will be required – the main probate where you reside and the ancillary probate in the county where the other real property is located.  Can this be avoided?  Yes, accounting for out-of-state assets, then, can eliminate this headache in the future by the use of Will Alternatives, but you need to be careful in your choice of such alternative.

3. Underestimating the Cost and Burden of Probate

Unlike the above two estate planning mistakes, this one does not concern oversights related to updating your plan. It belongs on this list, though, not only because it segues with the point just made, but because it’s a common and egregious error.

When your assets pass to loved ones via a Will, their distribution needs to first get a stamp of approval from the court. This means court fees, attorney expenses, and time. It also means exposing your estate to public scrutiny, as court records are available for anyone to view.

So, when drafting your Estate Plan, you will need to decide between a Will- or a Trust-based plan.  (Note, however, that even if you choose the Trust route, a Pour-Over Will should still be part of your Estate Plan and provides that the Trust is the beneficiary so that it will capture any assets that are left out of the Trust and pour them into your Trust at your death.)

Who needs a Trust instead of a Will? Anyone who wants to keep their assets out of probate court is who. And, yes, although a Pour-Over Will should be part of your Plan, if you plan prudently and fund the Trust properly along with execution of Will Alternatives for assets specifically meant to be left outside of the Trust, probate can still be avoided.

And, with respect to real property, placing your assets in a Trust (including out-of-state assets) eliminates the need for probate, and ensures your life’s work passes to whomever you wish, without hassle.

To learn more about common estate planning mistakes and how to avoid them, or to get started on building your Estate Plan, do not hesitate to reach out to the Law Firm of Blanche D. Smith either by calling (936) 301-0111 or using the contact form on our website.

Monique Hineline

Smith & Smith are very professional, informative, and relatable with examples and stories to ease the estate planning process. I had the best time at their lunch and learn. Even if you already have your estate planning in place I highly recommend attending a lunch and learn. Thanks Smith & Smith!