April Fool’s Day just passed, and we all love a good practical joke now and then. However, estate planning is not one to laugh at. If you already have an estate plan in place, that’s wonderful! But don’t let an old or inadequate estate plan make a fool out of your life, property, and legacy.
Let April Fool’s Day serve as a reminder to review your current documents and determine if you need to update language, additional provisions, or employ a different strategy (like “upgrading” from a basic will to a trust). When revisiting an existing estate plan consider these common mistakes we see when reviewing less-than-optimal documents:
TRUSTS MISSING RETIREMENT PLAN LANGUAGE
Many people have a valid portion of the estate assets investing in retirements plans such as IRAs and 401ks. The mistake comes when people designate their revocable living trust as the beneficiary of these plans, but the trust hasn’t been written or updated to grant the trustee the power to manage the accounts placed in the trust. Without vesting this power in the successor trustee (presuming the testator was the initial trustee and then passed away), the trustee can lack the ability to properly deal with the plan assets and unfavorable income tax consequences can occur.
OUTDATED LIVING WILLS
Living Wills also known as “advanced medical directive" should contain the appropriate Health Insurance Portability and Accountability Act of 1996 (more commonly referred to as HIPAA) language. HIPAA involves privacy and who can and cannot have access to your medical records. While it may sound silly, without this language your designated health care representative will not have access to your medical records. Without access, they may not be able to fulfill their duty in making the most informed decisions regarding your health care and treatment as possible. This mistake can be especially important if you’ve designated someone other than a close relative (such as a spouse or adult child) as your agent.
UNFUNDED LIVING TRUSTS
Another mistake is failing to fund your revocable trust. Without the guidance of a quality estate planner, the funding process can feel overwhelming. When people procrastinate or run into roadblocks when placing assets into their trust, they can get frustrated and fail to complete the process. This is a misstep with negative consequences because without funding the trust, it’s best thought of as an empty box waiting for a testator’s assets to fill it up. If you pass away without funding the trust, the estate will still need to pass through probate which takes time and costs money. And, quite frankly, the investment in the trust will have been for little benefit or advantage.
All jokes aside, everyone deserves a comphrensive and functional estate plan that accomplishes their goals. Don’t be a fool and let more time go by before reviewing your plan! Contact Scarola law today.