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Estate Planning Mistakes

By Jonathan C. Reed

From my experience as a probate lawyer I offer a summary of what I consider to be the biggest estate planning mistakes or estate planning problems:

  1. FAILING TO GET ASSETS INTO A TRUST-People pay a lawyer to do a trust but fail to get all assets into a trust. For example, Mom and Dad have listed each other as primary beneficiaries on their IRA accounts, but they fail to list their children or their trust as the secondary beneficiary. When the first parent dies, the surviving parent gets the dead parent's IRA fairly easily, but then when the second parent dies, that parent's IRA money usually has to be probated unless the IRA custodian has set up special provisions. Another example, is that people do a trust and put all of their major assets in the trust but fail to put a vacation home or a timeshare into the Trust. A person in Wisconsin might put almost all of their assets into a Wisconsin trust but fail to put a Nevada timeshare into the trust. When the person dies their heirs will have to do a probate in Nevada to pass the Nevada timeshare on to their heirs because in Nevada timeshares are considered real estate and all real estate must be probated in the state in which it is located.
  2. UNEQUAL PROVISION FOR CHILDREN LEADS TO FIGHTS-Parents provide unequally for their children and leave a bitter legacy to the child who receives less. I have seen a child who receives less than a sibling under a will pick a legal fight and spend more money on attorneys fees than what is actually at stake. That is how bitter it can be to find that the final communication from a parent was to favor one child over another. If an unequal distribution makes sense because one child is wealthy and the other child, for example, has special needs, the problem may be avoided if the parents obtains the consent of the child to receive less. Or, the parents can make a gift to the favored child while they are alive and provide for all children to share equally in their estate.
  3. BUYING WILL OR TRUST FORMS-People buy a will form or trust form and since they are not lawyers write language that can easily be interpreted in more than one way. This encourages the heirs to fight. I describe one example of using a will form gone bad on the Nevada State Bar's website at:
    https://www.nvbar.org/sites/default/files/Should%20You%20Hire%20an%20Attorney%20to%20Write%20Your%20Will.pdf
  4. SMALL BEQUESTS AND FRACTIONAL SHARES-Small bequests and small fractional awards can add to the complexity of a probate. For example, a $500 bequest to a foundation or a person will require that the $500 beneficiary be given notice of various probate hearings and be sent copies of all probate papers filed. Perhaps, the person writing a will could just trust their main heir to make a $500 gift. Or suppose a trust makes fractional awards of the entire estate to a large number of people. Now suppose, also, that the decedent, who lived in Indiana had a Nevada timeshare. Let's say that the decedent even got the timeshare into the trust so that it will not have to be probated in Nevada. So now the successor trustee has a timeshare that might be worth $2,000 and is supposed to divide it among several people. It could be quite a project selling the timeshare or getting all heirs to agree that one particular heir could have the timeshare.
  5. DOLLAR AMOUNTS VERSUS PERCENTAGES-Suppose a person has a million bucks and decides to leave $10,000 to each of ten people and split the rest among 4 adult children. So the parent is thinking each adult child will inherit $225,000. But supposing the parent dies owning only $100,000. Now the four adult children are cut out.