Top 5 Estate Planning Mistakes

People often ask me what the most common Estate Planning mistakes are. There are 5 mistakes that are recurring. They are:

1. No Estate Plan. The most common mistake is no Estate Plan. No Will, no Trust, no provision for guardianship of minor children, no Healthcare Directive in the event of illness, no Power of Attorney which would allow for bills to be paid. It is so sad to see children coming into my office needing a conservatorship for a parent because there was no Trust providing for incapacity. 

2. The Estate Plan is not Current. Most existing Estate Plans that I see are out of date and provide for AB/By-Pass Trust which is no longer necessary for 99% of the people. It is very important that you amend a Trust with AB/By-Pass Trust provision prior to the incapacity of a spouse. If a spouse does not have capacity to amend the Trust, it is too late to remove AB/By-Pass trust provision. Also, make sure your Estate Plan still reflects your desires. Are their new grandchildren you wish to provide for, should there be a Special Needs Trust for any of your beneficiaries? 

3. No Government Benefit Planning provisions. Most existing Trusts that I see do not have any provision for Government Benefit provisions. If there is any possibility that you will need government assistance such as skilled nursing, your Trust should include the power for your Trustee to deal with governmental agencies and to apply for benefits such as Social Security, Medicare, Medicaid and other services.

4. Failure to put Assets into Trust. The failure to put assets into the Trust is the most common mistake for all Revocable Living Trusts. Real property must be put into the Trust through a Deed that is recorded with the county recorder. Bank accounts must be in the name of the Trust or they will be subject to Probate unless there is a beneficiary designation on the account.

5. Failure to have Beneficiary Designations on Assets. To the extent that assets are not going into the trust, you need to make sure you have the correct beneficiary designations on your accounts. I recommend checking all of your accounts once a year. A common problem is that accounts get moved to new bank/brokerages and you have forgotten to do beneficiary designations on the new accounts.

If you do not have a estate plan, you should make it a priority. If you have a Trust and need to have it reviewed, I see people for a free 30 minute consultation in my Walnut Creek and Brentwood offices. 

This article provides only general legal information, and not specific legal advice. Information contained is not a substitute for a personal consultation with an attorney.  LAW OFFICE OF JOAN M. GRIMES, PHONE (925) 939-1680 1600 S. Main Street, Suite 100, Walnut Creek, CA 94513  © 2015 Joan Grimes

Incapacity Planning

Jim Hendrix was right when he said: “Life is pleasant. Death is peaceful.  It’s the transition that’s troublesome.” As baby boomers are moving into retirement at the rate of 10,000 per day many are for the first time thinking about their own mortality and the need to make arrangements for themselves if they cannot handle their own affairs prior to their death.

The first order of business in planning for incapacity is making sure you have an estate plan. For most individuals and couple with real property, a simple estate plan will include wills, a revocable trust, durable power of attorneys (“DPOA”)  and health care directives.

The revocable trust will include real property and any other substantial assets. However, a revocable trust will not eliminate the need for a power of attorney. A power of attorney is a written instrument in which one person (the “principal”) designates another person (the “agent”) to act on the principal’s behalf.  Like a revocable trust, a power of attorney allows a principal to entrust the management of his financial affairs to another. If the power of attorney is made “durable,” it remains in effect even when the principal later loses capacity. To be a durable power of attorney, it must include the magic words of “This power of attorney shall not be affected by subsequent incapacity of the principal” or similar language.

The advantages of a DPOA are that it is the simplest and least expensive to prepare. There is also no transfer of title to assets required, court supervision is unnecessary and administrative requirements are minimal.

A DPOA can also be very flexible. The powers granted to the agent can be very broad or as narrow as the principal wishes. Sometimes a DPOA is used if a principal is going to be out of the country or is having surgery.

The disadvantageous of a DPOA is that some third parties are still unwilling to do business with an agent despite statutory provision protecting the third parties. The most common problems arise in the sale of real estate or securities. On the other hand, third parties usually have little objection to dealing with a trustee acting under a revocable trust. Another problem of the DPOA is that they are only effective during the principal’s life. If there is a trust in addition to DPOA, the trustee can immediately exercise all necessary powers to settle the affairs of the trust after the death of the principal.

In conclusion, it is my hope for myself and for you that our transition from life to death is not too troublesome. To the extent that we plan for the transition, I know it will be easier. If you do not have an estate plan which includes a durable power of attorney, I recommend that you put it on your list of things to do in the coming year. If you don’t make a plan for yourself, someone else will and it may not be what you would have wanted. I see people for a FREE 30 minute consultation at my offices locate in Walnut Creek and Brentwood.

This article provides only general legal information, and not specific legal advice. Information contained is not a substitute for a personal consultation with an attorney.  LAW OFFICE OF JOAN M. GRIMES, PHONE (925) 939-1680 1600 S. Main Street, Suite 100, Walnut Creek, CA 94513  © 2015 Joan Grimes