Estate Planning Mistakes Can Be Costly – Part 1
Estate planning attorneys in Colorado know that there are lot of problems people can run into when they try to make estate plans without legal guidance. Do-it-yourself estate planning has become very popular in recent years. There are many companies, websites, and publishers offering guidance and documents that they say people can use to create their own plans. These DIY options are so common that estate planning attorneys commonly encounter clients who have problems because of their DIY efforts.
Over the next two weeks, we’re going to take a closer look at some of the common do-it-yourself estate planning mistakes that can end up costing you money.
Mistake 1. Making a will to avoid probate or estate taxes.
A last will and testament is one of the most essential estate planning documents around. While a will gives you some significant benefits if you want to create an estate plan, they are not suitable for every purpose. In particular, your last will and testament will do absolutely nothing if you want to try to reduce estate taxes or allow your estate to avoid probate. When it comes to probate, a will actually ensures that your estate will have to be probated. And as far as the estate tax goes, wills do nothing to mitigate the size of the tax bill your estate might have to pay.
Mistake 2. Not creating a plan that avoids probate.
Closely related to creating a will in order to avoid estate taxes or probate is creating an estate plan that takes no steps to try to avoid probate. The probate process applies to the property left behind by a deceased person. In order to ensure that that property goes to the rightful legal heirs, a probate court will have to supervise the process by which that property gets transferred.
Probate typically lasts at least eight months, and 12 months or more is fairly common. During all that time, someone will have to manage the estate. This takes time, effort, and money.
In other words, probate is a costly, time-consuming process that, though avoidable, is something that too few people try to mitigate.
Mistakes 3. Relying on your living trust to avoid probate.
Revocable living trusts are excellent estate planning tools because they allow estates to largely, if not completely, avoid probate when used properly. However, it is using the trust properly that is the key part. Creating a revocable living trust is great, but failing to fund that trust by successfully transferring individual property into the trust name is a common problem. If you don’t use your trust correctly, the probate avoidance benefits it conveys might be completely lost to your estate.
Next week we will give 3 more estate planning mistakes that can be costly. For more information on estate planning, attend one of our estate planning workshops in May. You will receive a free initial consultation just for attending!