The Three Worst Estate Planning Decisions You Can Make

When it comes to estate planning, which also means planning for incapacity, there are a lot of decisions to make. Unfortunately, a lot of attorneys, clients, and popular literature overcomplicate things and gloss over the extremely negative consequences of getting things wrong.

  • Financial and Health Care Agents

Who will be the executor of your Will? Who are your Agents under the Durable General Power of Attorney? Who are the Successor Trustees of Your Revocable Living Trust? Who would be Conservator of Your Estate should you become incapacitated for an extended period? Unfortunately, I have often found attorneys and clients overcomplicating these decisions in the planning process.

In this episode, I review the first of the “Big Four Questions,” one of the worst ways individuals (and sometimes attorneys) can approach answers to that question, and some of the potentially catastrophic situations that can come up.

  • Inheritance Age Limits That Are too Low

The law recognizes different ages to mark who is an adult in an often haphazard way. At eighteen, you are an adult responsible for your own actions under the law, you are allowed to vote, and even contract for hundreds of thousands of dollars of debt in the form of student loans. However, you are not allowed to drink alcohol, and in some states purchase tobacco products, until you are 21. On the other hand, children as young as 12 are facing decades of incarceration for felony crimes. But when it comes to inheriting a large amount of money, the question becomes “is the beneficiary mature enough to handle the inheritance responsibly?” Among most of my clients, eighteen or 21 is considered FAR too young, yet many clients, and even attorneys, assume that these are the typical ages of inheritance. Fortunately, that is why estate planning documents, and particularly trusts, can designate much higher ages for an outright inheritance, such as 40. Up until 40, the trustee can dole out money for education and necessities, or more likely pay the tuition or apartment rent directly. In well-drafted trusts, the trustee can also give the inheritance early if they feel the beneficiary is mature enough to handle it.

As an aside, which could be a whole article on its own, naming children or other beneficiaries directly on accounts and life insurance but putting age limits in a Will or Trust doesn’t do anything; they’ll still get the inheritance at 18 or 21 depending on what the account paperwork states. To make sure those age limits are enforced, the accounts need to end up in the trust in order for the age limits to be enforced.

  • Using a Will Instead of a Revocable Living Trust

After twenty-five years of practicing law, I still hear this all the time. “My estate doesn’t have to go through probate because I have a Will.” Yes, it does. Absolutely, it does. The only administrative difference between dying with a Will and dying without one is that in your Will you get to name your executors and determine how your property gets divided up. The court still oversees the collection of your assets, the payment of debts, and the distribution out to the beneficiaries with extremely exacting accounting to balance everything down to the penny. (And please see my other articles, videos, and podcasts on how beneficiary designations don’t really avoid probate, especially The Big Probate Lie on YouTube.)

For more information on these and other important areas of estate planning, check out the free e-book Estate Planning Basics available on our Linktree account at www.linktr.ee/plainenglishattorney or the audio version on this podcast.