Common Estate Planning Mistakes to Avoid

Estate planning attorneys see them all the time: the mistakes that people make when they try to create an estate plan or a will by themselves. They learn about it, when families come to their offices trying to correct mistakes that could have been avoided just by seeking legal advice in the first place. That’s the message from the article “Five big estate planning ‘don’ts’” from Dedham Wicked Local.

Here are the five estate planning mistakes that you can easily avoid:

Naming minors as beneficiaries. Beneficiary designations are a simple way to avoid probate and be certain that an asset goes to your beneficiary at death. Most life insurance policies, retirement accounts, investment accounts and other financial accounts permit you to name a beneficiary. Many well-meaning parents (and grandparents) name a grandchild or a child as a beneficiary. However, a minor is not permitted to own an asset. Therefore, the financial institution will not name the minor child as the new owner. A conservator must be appointed by the court to receive the asset on behalf of the child and they must hold that asset for the minor’s benefit, until the minor becomes of legal age. The conservator must file annual accountings with the court reflecting activity in the account and report on how any funds were used for the minor’s benefit, until the minor becomes a legal adult. The time, effort, and expense of this are unnecessary. Handing a large amount of money to a child the moment they become of legal age is rarely a good idea. Leaving assets in trust for the benefit of a minor or young adult, without naming them directly as a beneficiary, is one solution.

Drafting a will without the help of an estate planning attorney. The will created at the kitchen table or from an online template is almost always a recipe for disaster. They don’t include administrative provisions required by the state’s laws, provisions are ambiguous or conflicting and the documents are often executed incorrectly, rendering them invalid. Whatever money or time the person thought they were saving is lost. There are court fees, penalties and other costs that add up fast to fix a DIY will.

Adding joint owners to bank accounts. It seems like a good idea. Adding an adult child to a bank account, allows the child to help the parent with paying bills, if hospitalized or lets them pay post-death bills. If the amount of money in the account is not large, that may work out okay. However, the child is considered an owner of any account they are added to. If the child is sued, gets divorced, files for bankruptcy or has trouble with creditors, that bank account is an asset that can be reached.

Joint ownership of accounts after death can be an issue, if your will does not clearly state what your intentions are for that account. Do those funds go to the child, or should they be distributed between heirs? If wishes are unclear, expect the disagreements and bad feelings to be directly proportionate to the size of the account. Thoughtful estate planning, that includes power of attorney and trust planning, will permit access to your assets when needed and division of assets after your death in a manner that is consistent with your intentions.

Failing to fund trusts. Funding a trust means changing the ownership of an asset, so the asset is owned by the trust or designating the trust as a beneficiary. When a trust is properly funded, assets funding the trust avoid probate at your death. If your trust includes estate tax planning provisions, the assets are sheltered from estate tax at death. You have to do this before you die. Once you’re gone, the benefits of funding the trust are gone. Work closely with your estate planning attorney to make sure that you follow the instructions to fund trusts.

Poor choices of co-fiduciaries. If your children have never gotten along, don’t expect that to change when you die. Recognize your children’s strengths and weaknesses and be realistic about their ability to work together, when deciding who will make financial decisions under a power of attorney, health care decisions under a health care proxy and who will best be able to settle your estate. If you choose two people who do not get along, or do not trust each other, it will take far longer and cost more to settle your estate. Don’t worry about birth order or egos.

The sixth biggest estate planning mistake people make, is failing to review their estate plan every few years. Estate laws change, tax laws change and lives change. If it’s been a while since your estate plan was reviewed, make an appointment to meet with your estate planning attorney for a review.

Reference: Dedham Wicked Local (May 17, 2019) “Five big estate planning ‘don’ts’”

 

Special Needs Families and Special Needs Trust

If nothing prepares a person for parenting, consider how much harder it is to be prepared to raise a child with special needs. Parents often sink in uncharted waters. It’s not just a matter of negotiating all of the day-to-day details, says Newsday in the article “Be ‘biggest advocate’: Parents plan future for adult children with special needs.” Special needs families need to plan for what will happen as the parents age, become ill or die.

As an adult child with disabilities ages, eventually there will be medical issues. If the parents are gone, who will be able to make medical decisions? Where they live, who will oversee their finances and who will be there for them to rely on in a parenting role? There are many questions and they all need answering.

For one family, raising their special needs daughter was a full-time challenge. Their daughter, now 24, has autism. The couple sought out others in their same situation, noting that often even their own family members could not relate to their daily experiences.

It takes a village for special needs families to do more than survive. That includes estate planning and elder law attorneys with deep experience in special needs planning, social workers, therapists and medical professionals. Here’s what needs to be top-of-mind:

Don’t wait to plan. Families often think they have time, but you never know when unexpected events occur. Have a plan in place for legal guardianship, finances and health care.

Work with experienced legal help. You want to work with an attorney who has a great deal of experience and knowledge in special needs law and estate planning. Someone who dabbles on the side of a real estate practice is not the right professional for the task.

Stay in control. When children turn 18, they are adults. Parents and guardians will need to go through Surrogate’s Court to become the child’s guardian. Unless that is done, the parents and guardians will have no legal rights about the child’s medical, financial or other affairs. A successor guardian also needs to be named, so that when the parents are no longer able to serve, someone is in place to care for the child.

Create a Special Needs Trust. A trusts attorney with experience in Special Needs planning will be able to work with the family to create and structure a Special Needs Trust (SNT). A disabled person usually cannot earn enough to support himself, or the caregiver who remains at home to care for them and care-related expenses. The SNT helps to meet current needs and plan for future needs. The trust is used to preserve eligibility for any means-tested state and federal benefits. It allows the individual to have a better quality of life, by providing for expenses that are not covered by their benefits.

It’s very important that no assets be left to the child in an inheritance. Any assets must be placed in the trust. A well-meaning relative could put their eligibility for aid in jeopardy.

Parents and guardians also need to name a trustee and a successor trustee. The person needs to be competent, good with money management, organized and focused on caring for the loved one. It cannot be an emotional decision.

Parents of special needs children are advised to create a Letter of Intent, a narrative that outlines their child’s likes and dislikes, strengths and weaknesses, activities and friends they enjoy and other details that will help them to continue an enjoyable life, when their parents are gone.

Parent’s own estate planning must be done with an eye to maintaining the SNT and caring for their other children. This is a case when assets need to be distributed in a realistic and fair manner. If one sibling is the successor trustee, for example, they may need a larger portion of an estate to help care for their sibling.

Reference: Newsday (May 9, 2019) “Be ‘biggest advocate’: Parents plan future for adult children with special needs.”