Putting together an estate plan is often a long but well-thought-out process. However, last-minute mistakes can lead to future complications. These last-minute mistakes may be changing a designation in the plan at the last second, taking advice from someone and not consulting with their attorney, or not paying attention to changes to applicable laws. Individuals assume their estate plan is setting them up for the future, but if mistakes are made, then the estate plan may not work as intended. Below are two of the most common estate planning mistakes seen by attorneys, along with steps on how to avoid them.
Not Leaving Enough Assets to Fund a Trust
Many people create a trust as part of their estate plan. A trust allows a third party, a trustee, to distribute funds to a named beneficiary. The creator of the trust will provide specific instructions on how funds—or gifts—are to be disbursed to the beneficiary. But when creating a trust, certain individuals forget to make sure there are enough assets in the trust to pay for what has been intended to be given. Estate planning attorneys recommend putting additional funds in the trust in case assets decrease in value over time. Then, the beneficiaries will still be able to receive the amount intended.
Additionally, if an individual creates a trust with the intention of avoiding probate, but does not fund the trust with all of the assets, the estate will end up still needing a probate to distribute the assets inadvertently left out. Thus, creating unnecessary costs, delay, and headache for the executor of the estate and the beneficiaries.
Altering Beneficiary Designations
It is critical to methodically determine who a person’s beneficiaries will be in the estate plan. A beneficiary is an individual who will receive the assets listed in different sections of the estate plan. A person may choose to have the same beneficiary for all assets—financial accounts, property, life insurance policy, and retirement account funds; however, others chose to name different beneficiaries for different assets.
If a person changes a beneficiary designation without talking with their attorney, there may be unintended consequences. For example, people may sometimes change the beneficiary of an insurance policy from an individual to a trust. But this may have unintended tax implications that the creator of the estate plan did not anticipate.
Additionally, if someone passes away and is not removed as a beneficiary, it can become difficult for the estate executor to determine what should occur. In most cases, then the matter will be taken to probate court where a judge will decide who will receive the assets. Because of this, it is important to update an estate plan if a named beneficiary passes away.
Mistakes in an estate plan can be hard to catch. Therefore, people should reach out to an experienced estate attorney every few years to make sure there are no errors in the plan and no laws have changed that would impact the execution of the estate plan.
Contact a Houston Estate Planning Attorney
If you or a loved one believes there are issues in their estate, contact the Houston estate planning attorneys at McCulloch & Miller, PLLC. Our experienced attorneys have decades of experience drafting estate plans and finding and correcting mistakes made in previously drafted plans. No one should have to worry about if their estate plan has errors that will negatively impact their family’s future. Call us today to schedule a free consultation and to speak with one of our attorneys at 713-333-8900.