Regular checkup will help wishes to be fulfilled
How are your assets titled? Most trust and probate litigation we handle involves individuals who either never started or failed to complete their estate planning.
Recently, we represented five of six siblings in a dispute over their mother's sizeable estate. Mom had a trust, but it was only partially funded. Mom's broker, not aware of the trust, suggested that she make her sizeable brokerage account "payable on death" to her six children.
When the sixth sibling disagreed about the distribution of other assets titled in Mom's trust, he refused to sign the brokerage paperwork distributing the assets equally to the six children. Off to court they went.
With that unfortunate example in mind, here are five common estate planning mistakes that we see all the time.
1. NO ESTATE PLANNING
Every adult should have a will, durable general power of attorney, durable power of attorney for healthcare, possibly a living will, and, depending on the size of the estate, one or more trusts. Without a will, Ohio law—not you—decides who will inherit from your estate. Without powers of attorney and a living will, a court may appoint a guardian to take care of you and your medical and financial affairs if you are unable to do so.
2. OUT OF DATE ESTATE PLANNING
State and federal laws have recently changed in areas concerning estate taxes, durable powers of attorney, and health care powers of attorney—to name just a few. Estate planning documents should be reviewed at least every five years, whenever the law changes and whenever a major event occurs in your family, such as a birth, death, relocation, retirement or an unexpected illness.
3. PARTIALLY OR IMPROPERLY FUNDED TRUSTS
Professionally drafted trusts may never achieve their intended benefits if assets are not properly allocated between spouses. Probate avoidance will not be achieved if assets are not properly titled during your lifetime.
4. IMPROPER BENEFICIARY DESIGNATIONS ON IRA, 401(k) AND OTHER RETIREMENT PLAN DOCUMENTS
Each time you change jobs or open a new IRA, you are asked to complete beneficiary designation forms. When was the last time you reviewed these forms? Who was the primary beneficiary and the contingent beneficiary? What does the form say about who inherits if all the beneficiaries die before you do? The fine print on every form is different and with these accounts holding larger and larger balances, careful attention must be paid to coordinate retirement plan beneficiary designations with estate planning objectives.
5. IMPROPERLY TITLED REAL ESTATE
Mom and Dad own their home as "joint tenants with rights of survivorship." Dad dies. To "avoid probate," Mom adds eldest child's name to the deed as "joint tenants with rights of survivorship." Mom's will says to split everything equally between her three children. Mom dies. The three children split everything equally, right? Wrong. The eldest child gets a bonus—the house—because the house is not governed by Mom's will. Is this the result Mom intended? Probably not. Will there be hard feelings among the children concerning the house after Mom is gone? Most likely. Titling the house in the name of a trust or using the newer Ohio Transfer on Death Designation Affidavit could have avoided this problem and still avoided probate.