Five Common Estate Planning Mistakes People and Their Attorneys Make

Face it - nobody's perfect. Mistakes are made in every facet of life, including estate planning. The following are five of the most common mistakes that people make when they attempt to put their estate legal affairs in order.

(1) Not addressing long term care. If you don't address the possibility that your estate will be depleted due to nursing home or long term care costs, there may not be an estate to leave to anyone when you pass away. But sometimes this topic does not get addressed. People will go to a lawyer to "get a Will done," and nobody brings up the legal strategies that are available to protect assets from long term care costs. Some people have this addressed through long term care insurance. And others who have significant wealth can cover the cost of their care out of their pocket without depleting much of their estate, but the middle class often is forced to deplete their life savings to cover this expense, and then the state's Estate Recovery Rights force the sale of the home after death to reimburse Medicaid for it's expenses.

(2) Not Addressing Taxes. While most people do not have to worry about the federal estate tax (due to the current exemption of $11.2 million), there can be significant capital gains tax and income tax consequences that result from transitioning assets to your spouse and the next generations. How to best utilize the step up and the double step up (for married couples) should be addressed. And some people take advantage of various distribution rules by naming as beneficiaries of their traditional IRAs their spouse, children, grandchildren, or charities.

(3) Probate. I've heard many times, "I went to a lawyer to get a Will done, and nothing was said to me about avoiding probate." Many lawyers are comfortable writing wills and then cashing in on the probate/Succession when the person dies. No comprehensive estate planning legal program should be put in place without at least a discussion about whether the court-supervised, attorney involved probate can or should be avoided.

(4) Working With the Wrong Person. Some people see that financial institutions offer "Estate Planning," and then discover that some financial institutions define estate planning as selling you life insurance. You need to start with a lawyer, but not any lawyer. Many attorneys are not sophisticated in all of the nuances that are addressed in these mistakes. Or perhaps you start talking to a lawyer who "talks over your head and does not listen and does not speak in terms you can understand."

(5) Covering Reasonable Contingencies. Not every estate planning legal program can cover every possible contingency, but they should cover the basic "what ifs" like a spouse predeceasing. Many life insurance and IRA owners designate their spouse as their beneficiary, but they neglect to designate contingent or secondary beneficiaries. Then, your survivors are bound by the terms of the life insurance contract or the IRA agreement, and there may be unintended consequences. Providing for a spouse predeceasing should be addressed. Many estate legal programs also address a child predeceasing or a child getting divorced before or after he or she receives an inheritance.

You don't know what you don't know. So hopefully this article lets you know that certain areas may need to be addressed as part of putting your estate legal program in order, even if you did not think of these things initially.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

Phone: (225) 329-2450