In recent years, the popularity of do-it-yourself estate planning has led to some significant, and often very costly, mistakes. People who try to create estate plans on their own often have little to no experience in the law, and making even a simple mistake as they go about creating a plan they want to rely upon can be serious problem. Over the next two weeks, we’re going to take a closer look at some of the more common do-it-yourself planning mistakes that people make, and why you want to avoid them.
Mistake 1. Using a will to avoid probate.
A last will and testament is the estate planning tool that many people are most familiar with. Making a will seems like a fairly easy process, and it often is. However, a will that only meets the basic legal requirements of the state of California is not necessarily good enough. There is a significant difference between being a legal will, and being an effective one.
To make a truly effective will, you have to add the necessary clauses and pieces that the law may not directly require. Failing to include these pieces can mean that your wishes will not be followed after you are dead.
Mistake 2. Using a living trust to avoid estate taxes.
Even though changes in the law in recent years have lessened the impact that estate taxes play in most estate plans, it’s still an issue that you need to consider. If you have an estate that is large enough, not creating an estate plan that adequately addresses the estate tax issue can be an expensive mistake.
However, while there are tools that you can use to help mitigate the estate tax issue, for a single person, a revocable living trust is not one of them. Revocable living trusts are excellent estate planning tools, but they provide no estate tax mitigation benefits whatsoever for single persons. For married couples, a properly structured living trust can ensure that the maximum use of the applicable estate tax exclusion.
Mistake 3. Not taking probate into consideration
The reason revocable living trusts have become so popular in recent years is because of their ability to avoid, or at the very least minimize, the expense and time associated with the probate process. However, people who don’t take probate into consideration often do so because they don’t think it’s a serious issue.
In reality, probate is often a costly and time-consuming process. Even though probate will ensure that your family will receive their inheritances, it cost money and takes time. The average probate case in California can last eight months or more, and cost thousands of dollars that you might otherwise be able to use as an inheritance. If you develop a plan that doesn’t try to minimize probate, you could be wasting a lot of money.
Do it yourself is ok for repairing faucets and changing the oil in your car. However, complex matters, such as medical procedures and complex legal situations like estate planning, should be left to the experts.
Latest posts by Timothy P. Murphy (see all)
- What Do I Do with My Estate Plan When It’s Complete? - January 24, 2020
- Estates that Earned a Fortune in 2019 - January 22, 2020
- How Will You Age in Place and Be Able to Die at Home? - January 20, 2020