1. NOT MAKING AN ESTATE PLAN (and the corollary: not updating your existing plan when your life changes.) You know the saying that showing up is one half the battle. Writing your estate plan is at least half the battle. Keeping your documents current is important, too. If your documents name individuals who are no longer a part of your life, or if they do not fit your current financial status or current laws, you will need to update them so that they meet your goals.
2. FAILING TO PUT ASSETS INTO YOUR REVOCABLE LIVING TRUST. If you do not transfer assets into your trust, the trust may fail (meaning that the terms of it will not be honored.) At the very least, those assets left outside of the trust will not be subject to the oversight of your named trustee and will not pass according to your distribution plan.
3. LISTING YOUR REVOCABLE LIVING TRUST AS THE BENEFICIARY ON YOUR RETIREMENT ACCOUNT. Doing this can mess up the calculations for the required minimum distributions. It is better to consider your entire estate as a whole and to name adults as the beneficiaries of your retirement accounts. Under some circumstances (only minor beneficiaries or a special needs beneficiary), it may be your only option, but consult with your attorney or financial advisor before doing so.
4. FAILING TO SPLIT YOUR TRUST ON THE DEATH OF THE FIRST SPOUSE TO DIE. If you may be subject to federal estate taxes, and if your trust provides, you should split your assets when the first spouse passes on so that you can take full advantage of the exemption amount (the amount that you can pass on your death without paying estate taxes.)
5. NOT HAVING YOUR ORIGINAL DOCUMENTS. This one is not the clients’ fault; it’s the fault of the overly protective (or overly greedy) attorney. The file is YOUR file, not his file, for goodness’ sake. Call or send a letter requesting your original documents. On receipt, store them in a safe place.
6. WRITING ON YOUR ORIGINAL DOCUMENTS. If you have your original documents, it’s important to treat them appropriately. Do not write on them. If you feel compelled to edit them, copy the originals and write on the copies.
7. NOT KNOWING WHAT YOU HAVE. Review your documents annually. If after reviewing them, you are not sure what they mean, call the attorney who drafted them to make sure that you understand them at least on a basic level. If they are not appropriate for you at this point in your life, schedule an appointment to discuss changing them.
Originally published by Susan on January 20, 2014.