10 Common Estate Planning Obstacles and How to Avoid Them
Most of us understand that estate planning is important, but there are a number of obstacles that can arise during the process and prevent it from being done successfully.
Improper estate planning can result in a person’s wishes not being carried out, which can leave surviving loved ones facing a number of challenges that a person did not intend.
The following will review some of the most common challenges that can arise during the estate planning process as well as some of the steps that you can take to make certain that your estate plans are properly executed.
One common challenge that arises when estate planning is disputing family members, most often relating to children being treated differently under a parent’s estate plan. When one person is appointed as an executor with the assumption that he or she will treat all surviving family members equally, this is not always possible.
The best way to resolve the risk of a family conflict is to clearly and directly explain to your family members the reasons and motivations behind why you decided to structure your estate plan the way that you did. Clear the air now, while you can, and avoid trouble for your heirs down the road.
Creating an Inadequate Estate Plan
Without proper care and planning, a person’s estate risks being administered in a way that does not conform to his or her wishes. In some cases, a poorly crafted estate plan can result in a person’s estate being subject to California’s intestacy laws, which have an established order in which assets are passed down to beneficiaries.
While some families are content with the administration of an estate in this way, once the state intervenes, it can cause huge issues for certain families. When an estate is administered in accordance with intestacy laws, it can lead to arguments among family members, delays in distribution of assets, a drawn-out probate process, difficulty locating beneficiaries, forced asset sales, and reduction in the overall value of the deceased person’s assets as a result of probate.
Make sure your estate plan is iron-clad and that you have taken into consideration any and all contingencies, such as what will happen if you become disabled or otherwise incapacitated.
Failing to Tell Loved Ones About Your Plans
Once you create an estate plan, it is important to tell your loved ones about your plans in a direct and honest manner. This way, everyone who is included in your estate plan understands why you are making these decisions.
Even if you would prefer not to discuss these matters, it is vital that everyone understands your wishes so that they can be fully carried out after your death.
Not Reducing Taxes
If an estate plan is not properly created, taxes as well as other fees have the potential to greatly whittle away at a person’s estate. One of the most common situations in which a person’s estate can be unduly taxed is if he or she fails to create a proper trust and as a result, assets must proceed through the probate process.
Fortunately, an experienced estate planning attorney understand the various strategies that can be used to avoid taxes or reduce the amount as much as possible. Some of the most common tax challenges that arise during the administration of an estate include lack of liquidity, overuse of the unlimited marital deduction, and reduction of estate assets.
Being Afraid of Death
Many people hesitate to create an estate plan because they have difficulty confronting the idea that they will one day die. Some people even view estate planning as actions that are taken in immediate preparation for their death. In reality, many people live for years or decades after creating their estate plan.
The main objective that an estate plan achieves is making sure that if something unexpected does happen to you, your wishes will be fully carried out. Failing to address these issues and not creating an estate plan will instead greatly increase the chances that your wishes will not be fully carried out.
In addition to fears about death, there are a number of other reasons why people procrastinate when creating an estate plan. Even if you lead a busy life and have many other commitments, it is still absolutely critical to create an estate plan sooner rather than later.
Thinking That Estate Planning Does Not Apply to You
Many people think that the need for estate planning simply does not apply to them. These people are often under the mistaken impression that estate planning is only for rich people or old people.
In reality, estate planning is a good idea no matter the value of the assets that you own. Instead, estate planning is used to make sure that your healthcare, estate, and financial wishes are fully carried out if you are incapacitated or after you pass away.
It is also important not to delay in creating an estate plan because you are worried about how much it will cost or want to avoid additional fees. It is almost always the case that the price a person pays when creating an estate plan is much lower than the fees a person’s estate would pay if that person did not create a plan at all.
Estate planning is also valuable no matter how old a person is. Unfortunately, young people die or are incapacitated all the time due to a number of different causes. Their families are then left to make difficult decisions about their finances or healthcare without any official guidance or insight into that person’s wishes.
Failure to Update Your Plan
Some people think that estate planning is a one-and-done process. In reality, every time a person encounters a change in life, like a birth or death, it is important to make sure to appropriately update an estate plan.
If your life changes between the time that you create your estate plan and when you become incapacitated or die, it is likely that your true and current wishes will not be carried out. Instead your beneficiaries will have to follow the instructions outlined in your old documents that no longer reflect your most current life situation.
Some of the life changes that necessitate updating your estate plan include adoption, births, changes in state laws, death of a beneficiary or executor, the discovery of errors in estate planning documents, divorce, relocation to a new state, remarriage, sales of property, and separation.
Selecting an Improper Executor, Trustee, or Guardian
The decision about who will be appointed as an executor, guardian, or trustee of an estate is not one to be made lightly. Instead of rushing into this decision, there are a number of factors that should be carefully considered when appointing these individuals.
Many people fail to name individuals who are capable of successfully performing the duties required of an executor, guardian, or trustee. If the wrong person is appointed to an important position, it can result in delays in estate administration and asset distribution, family disputes, penalties for missing tax filing deadlines, and will contests.
Losing Estate Planning Documents
Creating estate planning documents that can successfully carry out your goals is just one part of the estate planning process. One important step that should be taken after these documents are created is storing them in a place where the will be secure and easily accessible.
While many people use safety deposit boxes for this, it is not the only option. It is also important to make sure that your loved ones who will be involved in your estate plan know where these documents are in case you are suddenly killed or incapacitated.
Some of the most common problems known to occur as a result of lost documents include increased administrative costs, inefficiency during the estate administration process, and unnecessary delays in the distribution of assets.
Misunderstanding the Estate Planning Process
There are a number of myths that persist about the estate planning process. With a lack of knowledge about what the process entails, some people even try to create their own estate plans or use templates they find online in order to avoid obtaining an attorney.
In reality, estate planning is a complex process and the best way to make sure that your wishes are fully carried out is to speak with an expert.
Speak with an Experienced Estate Planning Lawyer
No matter the exact reason why you are delaying the creation of your estate plan, it is important to understand the numerous advantages that come from making your end-of-life wishes official.
If you decide to create your estate planning documents on your own, or avoid creating a plan altogether, you are putting your assets and your loved ones at risk. In order to avoid the pitfalls mentioned above, it is best to obtain the assistance of an experienced estate planning lawyer.
Even though estate planning is complex, the assistance of an experienced estate planning attorney can make it much less so. If you need assistance navigating this process, you should not hesitate to speak with an experienced attorney like Melanie Tavare today.