Common Estate Planning Mistakes, Part I

Aside from not preparing any estate planning documents, here are some common mistakes our office has seen with estate planning documents

 Assigning Co-Trustees or Co-Executors.

The best advice is to just have one trustee and one executor. Having one is best, and then list in order who your alternates will be.  Many people think in fairness to all their kids they make them all responsible for administering the trust or estate.  That is a really bad idea.  It leads to a lot of arguments when you need everyone to agree on something.

If you have a house and you want to sell the estate assets, some of your children may say , ‘No, it should remain in the family.’  Or one child might say ‘I don’t want to sell.’  With another child saying, ‘How much should it sell for?’  These little disagreements will inevitably turn into family in-fighting, and there are going to be two sides and two factions. Not everybody gets along, and all those things come out.

If you have co-trustees and they don’t agree, who will get the final say?  Your trustees could end up in court battling out even the simplest decisions.

Also, having two or more trustees means two or more people have to sign checks.  Banks don’t want to monitor that, and if you and the other trustees don’t all live nearby that can get very complicated. 

Believing a Will is all you need to avoid loved ones going to court.

Probate is the legal process of administering a person’s estate both when they die intestate, meaning without a will, and when they die with one.  Probate means “proving the will.”

Although a valid will can ultimately direct where assets are allocated, it will likely not avoid the probate process if there are assets titled solely in your name.  The newest threshold for probate is $184,500.  If your loved one passes with assets valued over that amount then yes, you are going to Probate.  Most people’s houses here in California are valued at more than that.

Being too vague about items with sentimental value.

Generally, people give each of their kids an equal share.  But that doesn’t necessarily leave the option available for kids to say, ‘I want to buy this property’ or ‘I want this specific item.’  People believe their kids will figure things out, they all get along.  When people pass away, relationships change. Money changes people. Your children that got along so well when you were alive may not get along as well when you are gone. 

Being specific about what items should go to who will avoid fighting. 

Forgetting to update documents to reflect life changes.

The biggest mistake people make when it comes to their estate plans is their failure to update their documents.  There are certain life events that require the documents to be updated – marriage, divorce, births of children. It’s typically recommended that your estate plan be revisited every five to seven years. 

Forgetting to update your documents after a life event could mean an ex-wife, who you don’t like, gets a share instead of someone else you care about.  It could mean a new born child is left out.  Then a spouse might need to go to court to have that child added.  After life events, take a look at your documents and see if any updates or changes need to be made. Don’t hesitate or procrastinate.