Estate Planning for Seniors: 5 Mistakes Seniors Cannot Afford To Make

Estate Planning for Seniors: 5 Mistakes Seniors Cannot Afford To Make

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Everyone needs to have a plan in place to ensure their wishes will be honored in the event of death or incapacity. Estate planning can be as simple as the last will and testament, durable power of attorney and health care directive drafted by an estate planning attorney; or it may be more complex and include an irrevocable trust and other documents.

An estate plan should provide you with peace of mind knowing that someone you trust has authority to step in to make decisions about health care or business and financial matters in the event you become physically or mentally incapacitated. It also ensures that your estate is distributed and managed after your death by someone you trust to follow the instructions contained in your estate planning documents.

Each estate plan should be personalized to suit the wishes and circumstances that are unique to the person for whom it is created. A one-size-fits-all approach is not recommended when creating a plan, but there are some things to be learned and avoided by taking a look at five  estate planning mistakes frequently made by seniors.

Not having an estate plan

A recently reported survey showed that 62% of Americans do not have a will, which means that state laws and courts determine the distribution of their accumulated assets and wealth when they die. The failure to plan for death results in no consideration being given to the wishes of the deceased either as to distribution of the estate or in the selection of the person appointed as estate representative.

Not having an estate plan also means not having control over putting a person you trust in charge of making decisions about medical treatment, financial affairs and end-of-life issues when you are unable to make them on your own. Durable powers of attorney and advance health care directives, which include powers of attorney for health care, allow you to appoint a trusted representative to handle medical and financial matters for you.

Just as it is never too late in life for smokers to quit and take control over their health, it is never too late for seniors who procrastinated about creating an estate plan to get control over their estates. Some of the essential documents you may find in an estate plan include:

  • Wills: Wills name an executor to gather your assets, pay debts and taxes owed by the estate, and distribute what is left of the estate according to the instructions you include in the will. A court must oversee probate of a will, which involves fees and expenses. Probate can also take time particularly now as courts throughout the country reopen after shutting down or limiting operations due to the coronavirus pandemic.
  • Trusts: Unlike a will that only becomes effective after your death, a trust may be created and be used to place all or some of that you own under the control of a trusted friend or relative to manage them for you. When you die, the assets are distributed according to the instructions you give in the trust document without needing court proceedings to accomplish it.
  • Durable power of attorney: You designate an agent to handle business and financial matters on your behalf in your absence or when you are incapacitated. Powers of attorney are only effective during your lifetime and do not survive your death.
  • Advance health care directives: Designating another person to ensure that your wishes about health care and end-of-life decisions are carried out when you are incapacitated can be accomplished with living wills and powers of attorney for health care. Some states, such as California, combine several forms into one document.

Your attorney may suggest additional documents for your estate plan depending on your particular circumstances and needs.

Failing to update an existing estate plan

The birth of another grandchild, acquiring a vacation home, a new business venture or changes in the tax laws may require changes to an estate plan. It is a good idea to periodically review a plan to make certain it continues to represent an expression of your wishes and takes into account all of the assets you own.

Reviewing an estate plan also lets you ensure that the people named to fill the role of trustee, executor and other roles remain capable of doing so. If someone you chose as the executor of your will died, you need to amend the will to add a new person to fill the role.

Failing to update beneficiary designations

Whether you are creating a new estate plan or reviewing an existing one, do not forget to change beneficiary designations in life insurance policies, retirement accounts, or financial accounts with a named beneficiary. Assets containing language making them payable to a specific beneficiary upon your death usually pass outside of a will. For example, an insurance company pays the proceeds of a life insurance policy to the beneficiary you designated in the policy rather than according to the terms of your will. 

Failing to fund a trust created as part of an estate plan

Drafting and signing documents to create a trust to manage and control assets does not accomplish anything until you actually transfer ownership of them to the trust, which you may see or hear referred to as funding a trust. The trustee in charge of trust assets has nothing to manage until ownership of them transfers to the trust. Forgetting to do this important final step makes the trust useless.

Making children co-owners of assets

Adding your children as owners or co-owners of real estate and other assets you own may appear to be an inexpensive way to avoid probate, but the risks outweigh any benefits. The primary risk of making children owners or co-owners is that it puts the asset within reach of their creditors should they have financial difficulties. Speak to an estate planning lawyer for other suggestions, such as a trust, that can accomplish your goals without exposing assets to the risk of being seized to satisfy creditors. 

Conclusion

Death may be inevitable, but it need not mean leaving behind a mess for your loved ones to sort through as they try to settle your financial affairs. Estate planning avoids family discord and unnecessary expense in settling your estate while offering you peace of mind knowing that your wishes for the distribution of what you worked hard to acquire throughout your life will be honored.

About the Author

Steve Howards has been writing legal-centric articles for several years now. He started working with the personal injury attorney law firm Herrig & Vogt in 2019 as the Content Marketing Manager, which has allowed him to expand on his writing in personal injury, family law, and much more. Steve strives to offer the public advice on various laws covering a variety of practices.

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ABOUT THE AUTHOR

Steve Howards
Steve Howards

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