It is a common misconception that only the “uber rich” need an estate plan, when in actuality, everyone should have a plan. In fact, whether you plan, or not, you do have a “plan:” the difference is whether it is the plan you want, or one that New York Law decides for you based on the laws of the State. Here are five common estate planning mistakes and pitfalls to avoid!
- Failing to Plan and/or Revisit your Plan Regularly:
Failing to have any plan at all is probably the most common mistake. Statistically only 42 percent of US adults have estate planning documents in place and only about 36 percent of parents with minor children have end of life plans in place. While we may at one time or another feel that estate planning is not necessary, technically everyone over the age of 18 should have a plan in place. This plan does not need to be complicated, it can start as a simple Will that indicates who is to receive your assets and who will be entrusted with handling your estate in the event of death, and should also include documents called advance directives that indicate who will handle medical (health care proxy) decisions and financial (power of attorney) decisions, if you were to become incapacitated and unable to make your own personal and financial decisions during your life. Once your plan is in place, it is equally as important to re-visit your plan regularly to confirm that beneficiaries are still alive and those you wish to inherit your assets and that the individuals you have chosen to handle financial and personal affairs are still as you wish.
- Thinking a Trust will “over complicate” things or failing to fund a trust:
Revocable and/or Irrevocable Trusts are excellent vehicles to avoid “probate” (which is the Surrogate”™s Court process validating one”™s Last Will and Testament and the Executor gaining access to funds held in one”™s name alone after death) and to specify how funds are to be used and/or when they are to be distributed to beneficiaries. The use of a Revocable Trust as the center piece of your estate plan and the proper funding of said trust can eliminate the need for Probate of your Last Will and Testament.
- Relying too heavily on Beneficiary Designations
Many people think that the best way to plan is to have beneficiary designations on all assets. For example, you might have a brokerage account that is in your name alone and names your spouse and/or children as beneficiary. While this is a common “quick fix” to avoiding probate and allows funds to pass to a beneficiary upon death, it can cause more harm than good in certain situations. From a tax planning perspective, important New York and Federal Estate Tax Planning techniques can be lost if funds are passed directly to a beneficiary spouse. Additionally, if a beneficiary is a minor and receives the assets, a Guardian of Property must be appointed by the Court before the funds are released from the financial institution to said Guardian. These funds would then be held in Joint Control with the Court until the minor beneficiary reaches age of majority. A trust for a minor child could avoid this outcome. Having not only named beneficiaries, but alternate beneficiaries is also important, in the event your named beneficiary does not survive you.
Another issue that arises if you appoint a beneficiary(ies) for a bank, brokerage or retirement account is what happens to said account if the beneficiary is not surviving upon your demise. If there is no surviving named beneficiary, then said account will become part of your probate estate and if you have received Medicaid benefits (home care and/or nursing home care) it will be subject to any claims made by Medicaid and/or your creditors.
Lastly funds left directly to named beneficiaries are not necessarily available to pay for the expenses that might need to be paid after your passing. For example, if a single individual were to name one of his siblings as beneficiary on his brokerage account, those funds would go to that sibling at his or her death. If another sibling paid for the funeral and/or other expenses that arose, technically the beneficiary sibling has no obligation to use the funds he / she received to reimburse another, or pay for any expenses of your estate, etc.
- Using online templates and forms:
While convenient and cost effective, online templates and forms can inevitably lead to mistakes and/or omissions that cannot be corrected once an individual becomes incapacitated or deceased. Unfortunately, online forms are often incorrectly labeled, outdated, or do not comply with New York specific laws and/or estate and long term care planning concerns.
- Keeping your estate plan and wishes a secret
If you do not share your plan with your agents and/or trusted advisors, it makes their job in the event of incapacity or death very difficult. Having open communication with those you trust and advising them what assets you have and the plans you have put in place, and who they should contact in the event of incapacity / death (Doctors, Financial Advisors, Accountants, Attorneys) is instrumental to ensuring that your goals are met and wishes followed. Equally important is discussing your end-of-life wishes, including burial arrangements, locations, etc.
As you can see from the complexity of the above raised issues, working with an Elder Law and Estate Planning attorney can ensure that you have created a plan that is customized to your needs and correctly reflects your wishes and goals.
Lauren C. Enea, Esq. is a Senior Associate at Enea, Scanlan & Sirgnano, LLP. She concentrates her practice on Wills, Trusts and Estates, Medicaid Planning, Special Needs Planning and Probate/Estate Administration. She believes that it is never too early or too late to start planning for your future and she enjoys working with individuals and families to ensure that their estate and long- term care plan best suits their needs. Ms. Enea is on the executive committee of the New York State Bar Association (NYSBA) Elder Law and Special Needs Section and is also the Co-Editor of the NYSBA Elder Law and Special Needs Section Journal. She is admitted to practice law in New York and Florida. She can be reached at 914-948-1500.
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