Creating a well developed estate plan is the best way for a person to plan for a time during their lifetime, where they cannot manage their assets, and also to plan for the disposition of assets at death.
Each person’s needs and wishes regarding their estate during both life and after death can be carried out through estate planning. Unfortunately, there are some common estate planning mistakes that we, at Dutton Casey & Mesoloras, P.C., regularly encounter.
Mistake #1: Failing to Plan
If you fail to engage in estate planning, your wishes for your assets may not be fulfilled at your death. Without an estate plan in place, at your death, your assets will pass through intestacy. The law in Illinois determines the heirs to an estate, and all heirs of a deceased person are entitled to a certain portion of the estate. The portion they receive is dictated by the number of heirs and other factors. A friend or loved one who has no legal relationship to a deceased person can never be an heir to an estate. Also, the law of intestacy does not take into consideration any of the deceased person’s wishes. Therefore, if you want a say in how you would like your assets to be distributed upon your death, it is highly recommended to engage in estate planning. Otherwise, the law will control who receives your assets.
Also, while most people only think of estate planning at a person’s death, a power of attorney for property is an estate planning tool that may be significant during your lifetime. If you become unable to make financial decisions for yourself due to incapacity, whether due to an accident or cognitive impairment, a power of attorney for property will allow an agent, who you have previously designated, to step in and make financial decisions for you. Without this estate planning tool, you may end up being appointed a guardian by a court. This is both costly and you could be appointed a guardian who you would not have chosen to manage your finances.
Mistake #2: Setting up an Unintended Estate Plan
There are many different estate planning tools, which you may not think of as estate planning. These tools (joint titling, beneficiary designations, Last Will and Testament, Trusts, ect.) are all estate planning. If you do not properly plan, you may create an unintended estate plan, which is a common estate planning mistake.
For example, many people will add a person to an account as a joint owner for the sole purpose of that person assisting with bill paying. In Illinois, the legal effect of this action is that the joint owner owns 100% of those assets as soon as they are made a joint owner of the account. It does not matter whether they have never contributed anything to the account. They legally can withdraw the entire balance of the account. Also, upon the death of the first account owner, the entire account immediately transfers to the remaining owner. This asset would not be subject to Probate and would not be distributed to any heirs or named persons in a Last Will and Testament. Without proper estate planning, this or other unintended estate plans can result in negative or unplanned outcomes during a person’s life or at death.
Mistake #3: Not Keeping Your Estate Plan Updated
The final estate planning mistake is not keeping your estate plan updated. Circumstances in everyone’s life change with the passage of time. And while you may have signed a well thought-out estate plan in the past, it is important to keep it updated. For example, what if your children were minors when you signed your trust and they are now adults? What if your named executor, successor trustee, or agent under power of attorney has passed away? What if your financial situation has changed where you would now have a taxable estate? These are all very common occurrences, and they could necessitate a change in your estate plan.
These estate planning mistakes can be avoided. It is important to have a well developed estate plan tailored specifically to your situation and your wishes. Estate planning is not “one size fits all,” and your estate plan should be drafted for you. If you have questions about Common Estate Planning Mistakes and What You Can Do, please contact us.