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The Three Most Common Mistakes in Estate Planning

This article discusses the three most common estate planning mistakes I encounter in my practice and simple actions you can take to save your family from unnecessary financial hardship and work.

What Are The Three Most Common Mistakes?

1. Failure to Do Trust Administration Upon the First Death in a Couple.

Many couples assume that if one of them dies, the trust goes on the same way for their benefit. After all, it is all the couple’s property and goes to the survivor.

This is true to a certain extent; however, there are generally steps of administration that should, and some that must, be taken within a certain amount of time after the first death. If the trust has provisions for the surviving spouse to disclaim assets into a disclaimer trust in order to save on estate taxes, it must be done within 9 months of the first death or that ability to disclaim is lost.

When the first death occurs, always consult an estate planning attorney.

2. Failure to Keep Property in the Trust.

Not all property is transferred to a trust, but not having most of your property in the trust could cause your estate to have to go through a probate even though you have a trust.
Check your deeds, bank account statements, brokerage account statements to make sure these assets are in the trust. All property in a trust should be titled something like this: “Jane Smith, trustee of the Jane Smith Trust.” If the ownership of the assets is not listed this way, then the property is likely not in the trust. One common instance of this is when a bank requires someone to transfer property out of a trust to refinance and fails to make sure it is put back in the trust after the refinance is complete.

3. Failing to Check and Update Beneficiary Listings.

Most often, retirement accounts, insurance and annuities are not transferred to a trust because they have a beneficiary listed who will receive the asset upon the owner’s death. People often forget to change the beneficiary listed on an asset when a life change such as divorce or death occurs. If a former spouse is listed as a beneficiary, it is often the case that they will receive the asset even though the owner likely would have wanted someone else to have it. Additionally, if the person listed is deceased, then that asset could have to go through probate before going to the owner’s heirs.