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Chris Jones: 6 Most Common Estate Planning Mistakes

If you’re like most people, you have the best of intentions to execute plans for how you want your estate distributed when you die or your affairs handled should you become incapacitated.

Unfortunately, unless you take action, those best intentions will not be enough. Here are six of the most common estate planning mistakes people make:

Failing to Plan

The biggest mistake of all is failing to create a plan in the first place. Without an estate plan, one’s assets will be distributed as the law dictates where ever you live.

Usually if married, one’s spouse is entitled to a portion (the percentage varies from state to state) of one’s estate and the rest is divided among other relatives. If single, one’s estate may go to his or her children, parents or siblings.

If there are absolutely no living relatives, then the estate may go to the state. This is probably not what you want to have happen. In addition, without an estate plan, you have no way to select your children’s guardian or the agent to act for you, if you become incapacitated.

Doing It Yourself

It is tempting to try to save money by using a do-it-yourself online form service or just writing something up yourself, but these poorly drafted documents may only cost you or your heirs additional money in the end. It is impossible to know, without a legal education and years of experience, what the right legal solution is to any particular situation and what planning opportunities are available.

If there is anything about a family situation that’s not commonplace, using a DIY estate-planning program means taking a large risk that can affect one’s family for generations to come. Only by talking with an attorney can one determine whether a particular situation qualifies as commonplace.

The problems created by not getting competent legal advice probably won’t be borne by the person creating the estate plan, but they may well be shouldered by that person’s children, grandchildren, family and other beneficiaries.

Not Planning for Disability

A properly drafted estate plan not only specifies what will happen to one’s assets when one dies, it also plans for what happens if one becomes incapacitated. It is imperative to have documents, such as a durable financial power of attorney and advanced health-care directive, which appoint trusted agents to act on our behalf when we can’t act for ourselves.

Failing to Fund a Trust

Once an estate plan is drafted, the work isn’t done. If an estate plan includes a trust, the trust actually needs to be funded — by retitling assets into the name of the trust — or the trust will be useless and of no purpose.

Not Checking Beneficiary Designations

One should periodically review retirement plan beneficiary designations to make sure they aren’t outdated. Retirement accounts do not follow a will or trust — they are distributed according to the forms filled out with the provider. It’s necessary to make sure a beneficiary is named and the beneficiary is whom you want it to be.

Not Reviewing the Plan

Once there’s an estate plan in place, it is important to keep it up to date. Circumstances change over time and an estate plan needs to keep up with these changes. Major changes that may affect a plan include getting married or divorced, having children or experiencing an increase or decrease in assets.

Even when there aren’t any major changes, one should review the plan periodically to make sure it still expresses current wishes.

Chris Jones is an attorney at Rogers, Sheffield & Campbell LLP, a Santa Barbara law firm. Click here to read previous columns. The opinions expressed are his own. This article is not intended to provide legal advice. For legal advice on any of the information in this post, click here for the form or phone number on the Rogers, Sheffield & Campbell Contact Us page.

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