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How To Avoid Common Estate Planning Mistakes

estate planning

Estate plans are not merely for the super-wealthy. Most of us have assets worth something we want to pass on to our loved ones. However, it is estimated by AARP that only 34% of Americans have made an estate plan. Also, if you make some of the mistakes listed in this article, you may pass on less of your assets and funds than you wish. If you need help with next steps, our Encino estate planning attorneys at Ourfalian & Ourfalian can help.

What Should Be In Your Estate Plan?

A comprehensive estate plan is a toolkit that settles your financial and legal affairs, giving you peace of mind that your assets will be handled and distributed as you intended. If you leave any of the following tools out, there could be a negative impact on you and your loved ones:

  • Will: You detail what will happen to your property and who will raise the children when you pass away.
  • Healthcare power of attorney: You appoint a person to make decisions about healthcare if you are incapacitated.
  • Financial power of attorney: You name someone to make your financial decisions if you cannot.

Not Making An Estate Plan

Unfortunately, one of the most serious and common mistakes in this legal area is not doing an estate plan. Whether or not you have done estate planning, your loved ones will have to deal with your final affairs when you pass on. Regardless of the circumstances, your loved ones will be confronted by grief, and if there has been no estate planning, it is one more challenge they will be faced with.

It is always best to have a valid trust or will when you pass away. That way, those who love you know what your wishes were, and there is a clear path to move forward with handling your assets. It is best for your family if you have a will so it is clear who gets what and they know what you wanted to be done when you are gone.

Failing To Name Contingent Beneficiaries

A contingent beneficiary is a person who will receive the asset in the will if the primary beneficiary passes away. It is wise to name contingent beneficiaries for every asset in the will; if the primary one passes away, there will be no question of who gets it. Without contingent beneficiaries, there will likely be a will contest in probate court, which is usually a negative for your family and estate value.

Selecting The Wrong Person To Handle The Estate

An essential part of estate planning is choosing an executor. While your spouse might seem like the logical choice, they could be overwhelmed with grief and unable to think clearly about essential probate decisions. If they do not have the best grasp of finances, taxes, and investments, it may be better to choose someone else.

Also, situations arise where a child or spouse is not the ideal choice for executor because they disagree with the decisions you made for beneficiaries and other key matters. If you lack a good choice in the family to be your executor, you should talk to your estate planning attorney for ideas.

Making A Will That Specifies Investments

If the estate plan names investments that you want to leave to beneficiaries, it is essential to check that you still own them. If you do not, the estate could have to buy them at a higher current price, which would lower what your beneficiaries receive. This could drain most of your estate’s assets in the worst situation.

Not Doing Pre-Planning For Long-Term Care

It is wise for many people to have pre-planning for long-term care in their estate plan. Many people who require care in a nursing home will use Medicare. However, this is usually only possible if they exhaust their personal assets first. If you have a spouse behind on a fixed income, this can be a severe financial hardship.

When you include long-term care in the estate plan, you have a better financial path over the coming years. One way to do this is with a special needs trust, which allows for protecting a partner or spouse at home while making sure the one who needs Medicare funds can get them.

Not Making Gifts To Lower Estate Taxes

Another common estate planning gaffe is not to use early gifting to reduce the possible impact of estate taxes. For 2023, the IRS allows gifts of up to $17,000 per year per person to be exempt from estate taxes. For larger estates, taking advantage of early gifts can be key to avoiding estate taxes.

Not Updating Your Estate Plan

No matter how good the estate plan is, it must be updated occasionally. This is because family situations change, beneficiaries die, people get married and divorced, etc. Also, if your will is decades old and has not been updated, it could be out of compliance with current laws. Have your attorney review your estate plan every one or two years to be safe.

Not Telling Loved Ones About Your Plans And Wishes

It always helps to have a frank discussion with your loved ones about your estate plan. That way, they know what to expect when you pass on. One of the common reasons there is a contested will is there is an unpleasant surprise for one or more beneficiaries when the person passes away.

If a beneficiary thinks they were not treated appropriately regarding inheritance, it could cause problems. While beneficiaries must have valid, specific reasons to challenge a will, an unhappy beneficiary can at the very least cause family discord. So, that is a problem that is best avoided by communicating your intentions with your family ahead of time.

Contact Our Encino Estate Planning Attorneys

If you want to create an estate plan that ensures your assets are protected and inherited according to your wishes, you need the help of a skilled attorney. Contact our Encino estate planning attorneys at Ourfalian & Ourfalian are ready to assist at (818) 550-7777.

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Estate Planning Tools To Protect Your Property And Finances

estate planning

As you perform estate planning with your attorney, several estate planning tools are recommended to protect your property and finances. Learn about these essential tools below, and contact our Orange County estate planning attorney at Ourfalian & Ourfalian if you have estate planning questions.

Why Do Estate Planning?

Did you know that only about 1/3 of Americans had an estate plan before the pandemic? Many of us do not want to think about passing away, but protecting what you worked hard for in life is important if you have property and assets.

Our belongings are distributed to our family members when we pass away according to our estate plans. However, if you do not have one, the state of California will decide who gets what, and few of us want that. This is known as ‘dying intestate.’ 

In California, if you do not have a will, your spouse would receive 100% of community property and ½ to 1/3 of separate property if you have children. Perhaps that is what you want, but it is usually better to lay everything out with an estate plan.  

Ultimately, estate planning means not leaving it to the government to decide how to divide your money and property and which assets go to whom. If you have family members who do not get along, not having an estate plan can lead to a contested will or estate, which can rip a family apart. No matter how large or small your estate is, having a plan set up with some or all of the following estate planning tools is critical:

Will

Also known as the last will and testament, the will is the most essential part of estate planning that people use to control who gets what when they die. Dying without a will means leaving many critical decisions about your assets to the state.

A will can be flexible, and it usually names an administrator or executor to distribute your assets when you pass away. The will must be signed, dated, and witnessed. It also is critical that you were of sound mind when you created the last will and testament.

If you do not have a will, the state of California will name the executor, who is usually a close relative. It is essential to have a will so you can name who your executor is.

While a will is a critical part of your estate plan, it has limits. The biggest issue with having a will is that it goes to probate court, which provides your executor with instructions. However, probate is expensive, so you can use other tools to reduce the need for probate.

Power Of Attorney

Power of attorney allows someone to make crucial decisions in your name. The power of attorney document usually limits what the person can do in your name. However, durable power of attorney can more generally represent your wishes if you are incapacitated. 

For example, with an estate plan, durable power of attorney allows you to name someone to make financial decisions if you are in a coma or otherwise incapacitated. Also, a healthcare power of attorney states who your physicians should talk to if you cannot speak for yourself, and medical decisions must be made.  You can also identify specific instructions related to specific medical procedures or your health in general for your agent to follow.

Revocable Living Trust

A revocable living trust is a legal document that decides how your assets will be handled following your death.  The assets can include real estate, bank accounts, investments, and personal valuable possession. The revocable living trust, contrary to a will, is used to avoid the probate process and to protect your privacy and the privacy of your beneficiaries following your death.  It can also be used to minimize estate taxes after your death. 

Irrevocable Trust

An irrevocable trust contains assets to protect them from creditors and taxes…  Similar to a revocable living trust, an irrevocable trust is established by the trustor to transfer some assets to a designated beneficiary; however, unlike a revocable living trust, the irrevocable living trust cannot be changed or canceled by the trustor once established.  

The main reason for establishing an irrevocable trust is to reduce the size of the trustor’s estate because assets transferred to such trust as exempt from the trustor’s taxable estate.  Setting up an irrevocable trust can be challenging, so contact our Orange County Estate Planning Attorney to help you in the process.

Contact Our Orange County Estate Planning Attorney Now

Using the full arsenal of estate planning tools, your Orange County estate planning attorney can create a plan that reflects your needs and wishes. Please contact our Orange County estate planning attorneys at Ourfalian & Ourfalian now at (818) 550-7777.

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How Often Your Will Should Be Reviewed And Updated?

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If you wrote your will recently or a few years ago, it is understandable to forget about it. Experts recommend revisiting your will at least every three or five years. Some may need to review it more often. After finding out how often you should update or review your will, talk to the Encino living trust attorneys at Ourfalian & Ourfalian.

When Should You Review Your Will?

It is essential to review and update your will every few years. This is because everyone experiences life changes once in a while that can affect your estate plan. Here are some life changes you should consider updating your will for when they occur. At the least, have your estate planning attorney review the will at least every three years.

Starting A New Relationship

Marriage may cancel any will made by either spouse before the marriage was formalized. An exception is if the will was written in contemplation of marriage.

Many people who are newly married and already have a will may want to name the new partner as an estate beneficiary. So, you should update your will and estate plan after marriage or if you participate in a new common-law partnership.

It is commonly misunderstood that your assets will go to your spouse automatically if you pass away. However, if you fail to document your updated wishes in your will, the state of California will dictate how the assets are distributed. If they are not named in your will, your partner could be excluded from receiving their inheritance. Most people do not want the state government to decide who gets what of their assets. So, be sure to regularly check and update your will.

Raising A Family

Reviewing and updating the will is also vital when you have a child. It should be a top issue to name a guardian in your will to take care of minor children if something happens to you. While rare, you and your partner could pass away simultaneously, so having a guardian named is essential.

Beneficiary Or Dependent Is Disabled

Parents with a child with a disability may need to make the necessary updates to their will to reflect the current interests of that individual. It may be advisable to review the will with your estate planning lawyer to see how it could affect your child’s eligibility for government programs. Instead of leaving your assets to a child with a disability, it may be preferable to set up a living trust (see further below).

Death Of A Spouse

If your spouse or partner passes away, it is usually necessary to update your will. For example, legal documents will need updating if your deceased partner was named an executor or beneficiary.

Retirement

Your goals in your estate plan may change if you stop working. This gives you another chance to go over your will and estate plan. For example, could you lower your probate and tax costs when you pass away? Are all your beneficiaries up to date and accurate?

Change To Your Financial Situation

Many couples find that mid-life is an ideal time to review their will. You may be entering or exiting your prime earning years, so your will should reflect your current situation. Think about how your family will go on if you suddenly pass away or become incapacitated.

Also, if your financial situation, your will should be changed. For example, if your net worth is much higher than it was, there could be better tax planning strategies you should consider. Or, if you have sold some of your real estate assets, your will may need to be changed.

You May Want To Consider A Living Will

Another reason to review your will is to change how your beneficiaries receive their inheritance. If you have financially irresponsible beneficiaries, consider setting up a living trust. The trust serves as the beneficiary of the asset. It holds the assets for your children, and legal documents create the legal entity.

If you create a living trust, the named assets go to the trust and not directly to your heirs. They only receive money according to how the trust gives it to them. Setting up a trust also may be wise if you have a child with a mental disability. This ensures your child will receive their inheritance, but there is a legal process in place to oversee how the money is distributed.

Can You Make Handwritten Changes To A Will?

Yes, but you should implement all will changes correctly, or they could be invalid. Wills that have been changed by hand are more likely to be contested, which raises legal costs. This is because it may be hard for your lawyer and beneficiaries to know when the will was updated. Also, who made the change and when may need to be clarified. If not, the beneficiary could argue you made a handwritten change when you were not of sound mind

If someone challenges a handwritten change to the will, the executor must show that you made the changes intentionally. If updates to your will are not signed and formalized appropriately, it could cause issues and conflicts between heirs. Fortunately, many simple will changes are relatively inexpensive to have done.

Contact Encino Living Trust Attorneys

It is essential to set up a will so there is a clear plan for how your assets should be distributed at the end of life. However, your will should be considered a living document and should be reviewed regularly. Encino living trust attorneys Ourfalian & Ourfalian can assist you with your will and ensure it reflects your current wishes.

Our attorneys handle estate and will cases in Encino, Alhambra, Arcadia, Burbank, Glendale, El Monte, Granada Hills, Los Angeles, Monterey Park, North Hollywood, Pasadena, Van Nuys, and other communities in Southern California and the San Fernando Valley. Please contact our Encino estate planning attorneys for a complimentary consultation about your will at (818) 550-7777.