Even those with the best of intentions can fall into the trap of estate planning misinformation. Estate planning attorneys frequently hear rumors and ill advice disguised as facts. There are three assumptions in particular that are commonly held.
First, estate planning attorneys often hear that individuals need only a “simple” estate plan. Of course, simple is a fluid term. Most people mean that they do not want a document that is long or full of unrecognizable terms. However, there are a number of legal and tax consequences that depend on exactly how the document is written. In most cases, legal verbiage is key and simplicity can equate to ambiguity.
Experienced estate planning attorneys provide comprehensive documents because they realize that potential problems could arise in the future, and those problems are better addressed up front. Lengthy documents may be overwhelming to review, but court proceedings to address problems will be much more complicated. Further, unless an individual is attempting to write an estate plan on his or her own, there is no reason to try to simplify a plan.
Second, individuals often approach estate planning upon the assumption that their estate will be the same upon death as it is at the time of planning. Realistically, however, every person’s estate fluctuates daily and by the time a final document such as a last will and testament is actually used, his or her estate may be vastly different.
Similarly, individuals may assume family dynamics will remain the same. When estate planning, individuals must be able to look at their own families and estates objectively, understanding that this outside-in approach is for a short time. They should consider the things that could go wrong, heartbreaking events, loss of loved ones, divorce, disability and potential loss of property. Then they should decide the ideal outcome of each possible scenario.
Thinking about the possibility of pain and loss will not spawn those terrible occurrences into existence, but after decisions have been made, individuals can mentally rest knowing that regardless of what happens, their wishes will be followed.
Goal planning must also consider the possibility of the individual’s illness. Simply saying “my family knows that I do not want to be in a nursing home” is not a plan. Families are devastated to place loved ones into nursing homes, but most people in facilities are there because their medical needs require care that family simply cannot provide. Plan ahead for the possibility, and hope that the plan remains unnecessary.
Third, individuals too often use poor planning strategies to avoid “complicated” estate planning. In many cases, these “alternative” planning strategies are the result of a conversation with a well-meaning friend. And in some cases, the strategies work well. But for most estates, using back door techniques to “protect” property leads to liability and potentially significant tax problems later.
One common example of this is the individual who puts his or her own residential property into the beneficiary’s name. While in some cases this works well, in most cases it does not. Not only can the beneficiary’s future liabilities attach to the individual’s home, but the well-meaning individual effectively creates a tax liability for the beneficiary that was unnecessary. The attempt to avoid future liabilities instead can accrue a much more significant cost.
Estate planning is important because it encompasses the people you love and the assets that you have worked hard to accumulate. Do not fall prey to the ideas of “simple” estate planning. Formalize your goals to ensure that whatever the future holds, your plan will be followed.
Cynthia Griffin is an elder law and estate planning attorney at Burnett and Griffin PLLC in Elizabethtown. She can be reached at email@example.com.