1. All my property will be disbursed by the terms of my will. A will only distributes the assets left in a decedent’s individual name. Assets that pass by title or by beneficiary designation pass outside of the will by operation of law. For instance, if your home, retirement accounts and life insurance represent the majority of your estate, these assets are typically set to pass by title to the joint owner or by beneficiary designation to the named beneficiary. Unless the assets passing by operation of law are coordinated with the will, unintended consequences can result when the property is distributed. That’s why do-it-yourself software programs that create a template or form will often miss the mark. The will may accurately reflect the objectives regarding distribution of the estate, but the assets may not be properly coordinated with the will. In many circumstances, titling and beneficiary designations are just as important as the will itself.
2. I’m too young for estate planning. All adults should plan for incapacity and death regardless of the value of their estate. Failure to do so often results in a mess for their families. Accidents and illness are never planned and can happen at any time. Everybody should have a nominated legal representative to handle financial and medical care decisions in the event of incapacity. In addition, failure to have a valid will or trust designating the representative for an estate will simply result in more cost to determine the rightful party, as well as potentially cause confusion about who should receive the estate.
3. I just need a simple will. Most people approach estate planning with the opinion that their planning needs are quite simple. In reality, most people have planning needs that are much more involved than they realize. For instance, many people name children or grandchildren as beneficiaries of their estate. In doing so, it’s important to consider when the estate should be distributed to the beneficiary (outright, in installments or specified age), how much should be distributed and the succession of the beneficiary’s interest, if the beneficiary predeceases. Other planning considerations that require more thought involve planning for guardianship of minor children, estate taxation, children with special needs, unique asset succession (cabin or business), blended families, etc.
4. Having a revocable trust avoids probate. Those who wish to avoid the administration of a will in probate court often use a revocable living trust as the dispositive tool for the estate plan. However, a revocable trust must be funded properly to avoid probate. Thus, the assets of the estate must be titled in the name of the trust or payable to the trust by beneficiary designation.
5. My estate plan is complete. It is often said that estate planning is a process – not a one-time event. Change in family circumstance (marital, health, economic, etc.) and changes in the law often require revision to your planning documents. Planning documents that are more than five or 10 years old often require revisions. Most often, revising the estate plan simply involves minor changes to these documents. Furthermore, it is important to confirm that the planning that has been done is complete. On occasion, final drafts of documents remain unsigned or the signed documents lack coordination with the assets of the estate. This is done with proper asset titling and beneficiary designations.
Attorney David Ness heads the Trusts & Estates practice group at Eden Prairie, Minnesota-based Fafinski Mark & Johnson. He works with individuals and organizations in all aspects of estate planning.
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