By Lane V. Erickson, Idaho Estate Planning Attorney
Having been an estate planning attorney for over 20 years I’ve seen my share of horror stories when it comes to dealing with client’s estate planning, or lack of estate planning and how this affects their family and loved ones after they pass away. Based on these experiences I find that my role as an estate planning attorney is to guide my clients in a way that will help them avoid these kinds of problems. To motivate my clients I help them understand how expensive estate planning mistakes can be for them and for their loved ones after they pass away. If you have gone to the trouble to create your own customized estate plan you want to make sure that it actually will do for you what you want it to do.
Below is a list of the three biggest Idaho estate planning mistakes that I come across regularly. Usually these mistakes are found after a person has passed away. When that occurs, it’s usually too late to fix those mistakes. However, by understanding what these mistakes are while you are alive, you have the ability to take steps to make sure that none of these mistakes happen in your own estate planning.
- Putting Non-Estate Assets Into Your Estate
The first big mistake that I often come across is that I will have a client who will take non-estate assets and place them into their estate. To be clear, many people do have both estate assets and non-estate assets. Non-estate assets would include life insurance, and any items that are actual POD accounts which most usually are retirement accounts such as IRS, 401ks, annuities, and sometimes pensions or other retirement accounts.
Non-estate assets are controlled by the contract that created them. For example, with life insurance, a person will enter into a contract with an insurance company. This contract will state that so long as the person pays their monthly premium, the life insurance money will be paid to whoever is listed as the beneficiary on that contract. The individual then has the ability to list on the contract the name or names of whoever they would like as the beneficiaries to that life insurance contract. Then, when that person passes away, the beneficiary provides proof to the insurance company of the person’s death, and fills out whatever documents and forms the life insurance company requires. After this is done the life insurance company pays the life insurance monies directly to the beneficiary. In this way, the money from the life insurance never becomes an asset of the estate.
As mentioned above, life insurance is an example of a non-estate asset. Other non-estate assets that work the very same way include the retirement accounts listed above. The very best thing a person can do is to make sure they fill out the beneficiary forms on the contracts they enter into for any non-estate assets they have. If they do not fill out these beneficiary forms, then the non-estate assets actually become part of the estate and have to be dealt with through probate.
- Not Funding a Trust
The second biggest mistake I often come across is that a person will have gone to the effort to create a trust but will not have put anything into the trust. A trust is like a pie, and the documents that create the trust are like a pie crust. However, unless some money, or other assets are transferred into the trust, the trust is not funded and actually does not exist. To continue the pie example, transferring assets into the trust is like putting the pie filling into the pie.
There have been many times I have had families come to me after a loved one has passed away. They are shocked to learn that the trust that was carefully created was never funded, and as a result the trust actually does not exist at all. Usually people create a trust because they want to avoid probate, or because they have some other specific need that they are trying to meet. If the trust is not funded, and as a result does not actually exist, the family will not be able to utilize the trust after their loved one passes away.
- Not Updating Your Estate Planning
The final big mistake that I often come across is that a person had an estate plan created but did not update their estate plan after some major change occurred in their life. We usually encourage our clients to update their estate planning documents anytime they go through a major life change. These would include the birth of a loved one, the death of a loved one, a marriage, a divorce, someone moving away, or just the passage of a long period of time.
I have personally seen clients go through a good deal of heartache because a loved one did not update their estate planning. Often this means that people who are no longer part of a family may still be listed as beneficiaries who will receive a part of the estate. Alternatively, it may mean that someone who they no longer wanted to have an appointment as a personal representative or a trustee may still be listed to do those things. These mistakes often create hardship, and heartache for family and loved ones who are left behind.
ENLIST AN ESTATE PLANNING ATTORNEY TO HELP YOU
When it comes to estate planning or probate you should never try to do it alone. If you have questions for yourself or for your family and loved ones, we can help. Call us toll free at 877-232-6101 or 208-232-6101 for a free consultation with Lane Erickson and the Racine Olson team of Estate Planning attorneys in Idaho. You can also email Lane Erickson directly at firstname.lastname@example.org. We will answer your questions and will help you solve your Idaho Estate Planning problems.