Estate Planning is about CONTROL. The proper planning enables you to control your life and your finances for your lifetime. If you don’t plan you will lose control. It is as simple as that. Unfortunately many people don’t plan properly and end up making big and expensive mistakes.
Mistake Number 1 – Dying Without a Will or Trust
When you die without a will or trust you don’t control your estate, the “Law of Default” controls. The Law of Deafult is the intestacy law in the state in which you live. The laws in each state spell out what happens to your assets if you don’t write your wishes down in a will or trust. One common example is the death of a married man with children from a previous marriage. If the man does not have a will or trust, the law of default in many states is that the assets are divided: one half to his current wife and one half to the children of his prior marriage. It doesn’t matter what the man wanted. The Law of Default controls.
Mistake Number 2 – Having an “I Love You”
An “I love you” will means you are leaving all of your assets to your spouse and then all of your assets to your children or other loved ones. The first big problem with a will is that a will is the key to the probate court. If you have a will, it must be probated in court to be effective. Secondly, the writer of the will may be cutting out his or her children or other loved ones, from getting any assets. If the person who writes the will dies first, the assets go to the surviving spouse. The spouse can then give all the assets to the spouse’s new spouse, or other beneficiares, leaving the children with nothing. There is no control in place to protect the children or other loved ones.
Mistake Number 3 – Giving Assets Directly to Your Loved Ones
When you give your assets directly to your loved ones, the assets are theirs. You have lost control. In the hands of your loved ones the assets are subject to the following furies: predators and creditors. Creditors are bill collectors. If your loved ones are in financial trouble, the assets could be lost to their creditors instead of being used for the benefit of your children or grandchildren. Predators are just as bad. Predators are the soon to be ex-spouses of your loved ones. With divorce rates at 50% or more, do you want your assets to go to your soon to be ex-son or daughter in law?
Mistake Number 4 – Owing Property in Joint Names
Owning property in joint names is just like giving assets directly to your loved ones. When you die, you lose control because the assets go to the surviving joint tenant. Let’s suppose you set up a joint bank account with one of your children. The account is used to pay your bills. You want your child to be on the account to pay bills for you if you are unable to pay the bills yourself. This might seem to be a good idea. However, what happens if you die? The assets pass directly to the surviving child. The account legally belongs to the survivor. Now, let’s say one of your other children pays for your funeral and asks the child who is on your account for a reimbursement. The child on the account does not have to spend any of that money on your bills. The money belongs to the surviving child and the one who paid for the funeral may be out of luck.
Mistake Number 5 – Not Having a Revocable Living Trust
A Revocable Living Trust gives you the control you need over your property. You determine who gets and controls you assets. The choice is not made by the Law of Default or the state in which you live. In addition, you can have a loved one manage your finances if you cannot, but then at your death, the assets pass the way you wish. In addition, you can have the assets be used by your spouse after your death. Then, at your spouse’s death, whatever is left will pass to your children or loved ones. A trust is a great way to go. This Legal Guide does not constitute legal advice and does not and is not intended to create an attorney-client relationship. The law may vary depending on the state in which you reside. It is intended only to give some direction in which to seek assistance.