Estate Planning Pitfalls to Avoid

Our San Jose Trust Attorneys want to make sure you’re aware of the six common Estate Planning pitfalls to avoid that so many people accidentally fall into!

  Estate planning is often very misunderstood, even by other attorneys. Often people think that they should be able to get a full estate plan for $1,000 or less because they saw something online that said, “we can do your trust for cheap.” However, doing your estate planning for “cheap” is very likely to walk you right into the pitfalls that our trusts avoid. 

Here are some of the Estate Planning pitfalls to avoid that you can wind up in, why you want to avoid them, and how to avoid them:

• Wrong type of trust

  We often get the question, “why does my trust need to be reviewed so often,” and “why does my trust ever need to be updated?” 

          Trusts have their own lifecycle. As your life changes and evolves, it is important to ensure that your trust adequately protects you, your family, and your estate. For those who never have their trust reviewed or do not want to make necessary changes, they are at risk of having a trust that does not properly protect them from incapacity or long term care concerns, leaves their estate exposed to unnecessary taxes, does not adequately provide for their adult children, does not protect against the surviving spouse remarrying, and more. This is all to say, that your priorities and needs are likely going to change at least once from the time you established your trust, to the time you pass away. We recommend that you have your trust reviewed every 3-5 years, not because you need changes every 3-5 years, but because this helps ensure that you maintain your trust and continue to understand it, but also to catch changes that need to be made before an emergency or disaster happens. 

• Not addressing incapacity

         We often see trusts prepared by other attorneys that either omit provisions dealing with incapacity, or that do not properly address it. One of the unfortunate realities that many will face at one point or another is dealing with incapacity.

         In many trusts, it states that if there is a question as to the creator of the trust’s capacity, a judge will make the determination if they can still serve as trustee, or that two licensed physicians will do so. There are a few issues with this. The first is, your trust should be protecting you from Court, not putting you in it. If you are incapacitated, the last thing you should be dealing with is the Court. You will be in a vulnerable position but essentially have to wait for a Court hearing where they will make a judgment if you are competent or not.

         The issue with naming two physicians, is that it is very rare to have two physicians who will be willing to play both judge and medical. They would be assuming the responsibility of removing someone from financial control, which is not only a large burden, but it could also open them up to liability. Moreover, it is very hard to find two physicians who will agree with each other completely.

         Not having capacity addressed at all is essentially guaranteeing that you will end up in Court. As discussed above, your documents should be keeping you out of court, if they are providing proper protections for you. If you are not sure if your documents properly protect you or whether they address incapacity, it is important to have your trust reviewed. If you do not have a trust, it is important to ensure that whoever establishes your trust understands the importance of incapacity considerations and protections.

3.             Creating your own trust

There are many people, lawyers included, who unfortunately feel that they can create their own trust. This is almost certainly a recipe for disaster. Unless you understand trust and estate laws, it is almost a guarantee that either you or your family will end up in Court. Many “trusts” we review that were created by a non-trust attorney or individual leaves numerous areas open for the individual or family to be vulnerable to incapacity issues, probate, estate taxes, and more. It is vitally important that you do not create your own trust or have a non-trust attorney create one for you.

4.             Not working with a qualified professional

  This is a similar issue to having a non-trust attorney prepare your estate plan. If you do not work with an attorney who understands estate laws, trust laws, tax laws, long term care laws and rules, and more, then you are risking paying someone to create documents that will not provide adequate protection, and cost you significantly more in the long run. Many people think that they can take the “cheap” way with estate planning, but as our founder often says, “You do not know the trust cost of an estate plan until you need it.” For those unique individuals whose lives go perfectly, they can get away with establishing a cheap plan. For the rest of us who have lives that have ups and downs, it is vitally important that we have an estate plan that is properly created, and will protect us from those unfortunate but likely circumstances so many of us will experience at one point or another.

         You want to work with an attorney who knows how to protect your from things you may not even consider, but who also can lead you through discussions that can be challenging and emotional, in order to create a customized plan that will properly protect you, your family, and your estate plan.

5.             Writing on your original documents

When you write on your original documents you run the risk of invalidating a section, or in some cases the entire document. You can also cause questions as to whether or not you are the one who actually wrote on the document(s), what your true intentions were, and whether the handwriting should be honored. These questions can unfortunately mean that your trust has to be brought to the Court and the Court will determine if the writing should be honored or not. 

6.             Attempting to amend the trust yourself

When you attempt to amend your trust yourself, there is a very high possibility that the amendment will not be honored if it was not formally done. Similarly to writing on your original documents, by amending a trust without the proper language or formalization necessary, you can invalidate the trust, cause confusion that leads to beneficiaries or trustees going to court to know what the trust says or what language should be honored, and can lead to additional contention if you have a situation where everyone does not get along perfectly. It may seem like all you have is a “small change” but you do not want to cut corners to save money now, just to land your family or other beneficiaries in Court because they do not know which language to adhere to. 

While estate planning may seem straight forward or simple, it is so important to understand that there are numerous pitfalls that we see people fall into because the law is often more complex than it seems. If you want to ensure that you, your family, and your assets avoid these pitfalls, and others, please contact us at (800) 244-8814 for a consultation with one of our skilled estate planning attorneys. 

If you have any further questions about asset protection planning and strategies to shield your wealth, or if you’d like to have your current asset protection plan reviewed to make sure it still meets your needs, please contact us at our California asset protection office at 800-244-8814 to set up a consultation.