When people create an estate plan, they do so with the intention that it will express their wishes for the disposition of their assets at death. There are several documents which comprise a complete estate plan.
Below are two mistakes that may result in unintended consequences with your estate plan documents:
1. Failure To Fund A Revocable Living Trust
The creation of a Revocable Living Trust can offer great benefits, but it will be wholly ineffective if it is not properly funded during the lifetime of the creator (commonly referred to as the “grantor” or the “settlor”). The creation of a Revocable Trust document does not complete the estate planning process. There is yet more business to be done to ensure that the Revocable Trust performs as designed and intended. The title on certain assets must be changed from the individual’s sole name into the name of the Revocable Trust. A few common examples include:
- Preparing and recording a new Deed transferring title of the real property to the name of the Revocable Trust
- Transferring title on financial accounts (bank accounts or investment/brokerage accounts) from an individual’s sole name to the name of the Revocable Trust
It is important to note that retirement assets, such as IRAs, must be owned by an individual and therefore, are not able to be re-titled to the name of a Revocable Trust.
When individuals re-title their assets into the name of the Revocable Trust the assets will pass to the Trust’s beneficiaries, outside the probate process. If a Revocable Trust was not properly funded and does not own any assets, then the assets of the decedent will not pass directly from the Revocable Trust to the beneficiaries without additional steps being required.
2. Failing To Update Your Estate Plan
Unfortunately, the mere creation of estate planning documents does not in and of itself reflect a complete estate plan. Individuals should fully implement all aspects of the estate plan, review it on a regular basis, communicate with their estate planning attorney to keep him or her up to date so that changes can be made to the documents if necessary. Failing to review and update estate planning documents at regular intervals may result in unintended consequences and thereby diminish the value of the estate plan.
It is helpful to think of your estate planning documents as items which grow and change as your life does. When there is a major change in life, such as a marriage, divorce, birth or death of a beneficiary, individuals should update their estate plan by speaking with their estate planning attorney. It is recommended that a client consider updating their estate plan every 3-5 years, depending on circumstances in his or her life.
It is important to also ensure that your named attorneys-in-fact under your Financial Power of Attorney and your health care agents under your Health Care Power of Attorney are still ready, willing and able to perform in said capacities. Engaging in a conversation with the individuals you wish to name to serve in these capacities can minimize the possibility of any of those individuals being unaware of their appointment as your agent and potentially unwilling to perform in such capacity on your behalf.
Ready to get started? Contacting an estate planning attorney who can offer guidance and help you tailor an estate plan for your specific situation is a good first step.