You’ve planned for the future and figure your estate plan is intact – but is it possible you’ve accidentally committed one of several common estate planning mistakes? If you’re like many Americans, the answer is quite likely yes. That’s because these common estate planning mistakes might not seem like mistakes at all. The problems only arise after you’ve passed away and your loved ones are left to deal with the consequences.

“With apologies to poet Robert Burns, the best-laid estate plans of women and men sometimes go awry.” That’s how writer Mark Ray begins his 2021 article on the NextAvenue website about some of the common errors even well-intentioned people can make when putting together their estate plans. We wanted to bring this story back to the Blog to help you see how even simple mistakes can derail even the “best-laid” plans for passing your assets along to your loved ones.

Common Estate Planning Mistakes: A Guardian Designation That Backfired

As an example of planning gone wrong, Ray tells a sad tale of someone who thought she was doing the right thing for her teenage daughter, only to have the plan backfire. “The woman, a single parent, left behind a detailed estate plan,” Ray writes, “but also left behind a problem: after she died, the guardian she’d named for her teenage daughter declined to serve.” 

Ray spoke with an attorney familiar with this sad case who explained that such occurrences are all too common. “It’s just the nature of my business,” estate attorney Crystal West Edwards told Ray. “I’ve got to assume that everything fails.” 

In this case, the designated guardian decided they didn’t want to care for a teenaged child, so the daughter ended up in foster care. “Had the woman named an alternate guardian, as many estate attorneys recommend, the first guardian’s refusal wouldn’t have mattered,” Ray concludes, “and the daughter’s life wouldn’t have been disrupted.”

Guardianship arrangements aren’t the only things that can go awry in estate plans. Here are a few other common mistakes you’ll want to know about so you can prevent them.

Common Estate Planning Mistakes: Joint Ownership of Bank Accounts

Seniors are often advised to add an adult child onto their bank accounts as a joint owner to simplify the administration associated with bill-paying and account access as the parent ages. But there’s a pitfall hiding in this common practice: “[GU1] When the older person dies,” Ray says, “the account becomes the sole property of the child, regardless of what the deceased’s will says.”

This means that no matter what the surviving siblings agree upon, the one child is the sole proprietor of the account, and this potentially makes dividing assets a huge mess. It can even get extremely contentious, as many families can attest.

Crystal West Edwards advises parents regarding adult kids who are deciding whose names should be added to Mom or Dad’s accounts: “We should either add all of them or have in a separate writing that it’s your intention that you’re only doing this for convenience purposes and this is still considered an asset that you would want divided.”

Alternately, you can create a revocable living trust, an estate planning document that can be amended while you’re still alive. Sadly, although it’s often well worth the effort to take these steps as a hedge against future conflict, many people ignore these precautions, since they can be expensive and a bit complicated. Consulting a good elder care attorney is vitally important.

Common Estate Planning Mistakes: Multigenerational Bequests

It seems like common sense to use your will to bequeath a percentage of your estate to heirs in multiple generations. But if you bequeath a percentage of assets to minor heirs, you’re creating a potential headache, New York attorney Joshua Goldstein told NextAvenue.

Goldstein notes that multigenerational bequests can “get into questions of whether the law actually allows it. So, you end up having to have a judge sign off, which (a) delays things substantially and (b) increases the cost. What is well-intended in leaving something to great-grandkids can actually became very expensive if your estate’s very modest.”

Instead, Goldstein and other estate planning attorneys advise leaving either a specific dollar amount of money to minor children, or just limiting your bequests to the adult kids and grandkids in your family to prevent unnecessary costs. Here again, good advice prevents a host of potential snags in executing your estate plan.

Common Estate Planning Mistake: Someone Remaining in Your Home

Your home—as both an asset as well as a living space for your beneficiaries—can become a real source of conflict in the years after you’re gone, unless you’re careful to be very specific about your planning. Ray recounts a story he heard from California attorney Mark Padilla, about a client who created a property trust that allowed his second wife to live in the home he had bought before their marriage, since the mortgage had been paid by their joint earnings. But the man’s daughter was named as the successor trustee.

Thanks to the ambiguous terms of the trust, the surviving spouse was allowed to live on the property for the rest of her life – but she ended up being beholden to the man’s daughter for control and oversight of the property. Padilla relates, “It wasn’t long before the husband’s daughter showed up making demands on the surviving spouse to make expensive improvements to the yard.” This led to bad blood and years of vicious litigation that finally ended when the women agreed to name a professional trustee and revise the terms of the trust.

Edwards also warns that similar issues can arise when an adult child lives in the house after the parent dies, perhaps because they were acting as a live-in caregiver. “The will says that the house is going to go to the children equally,” says Edwards, “but it doesn’t factor that one of the kids lives there. Is the child who lives there going to get first right of refusal to buy out their siblings? Are they going to be paying two-thirds of fair market rent to their siblings? Are they going to live there rent-free and then, when they don’t want to live there anymore, it’s sold?”

Plan Ahead and Be Clear About Your Wishes

Like with so many of these situations, controversy can be prevented through clear, specific conversations ahead of time. “The biggest thing is getting clear on what Mom or Dad wants,” Edwards says. “If an estate planning attorney doesn’t ask you for detailed information about your family and your finances, you have to go somewhere else. Abort, abort, abort.”

You don’t have to be anxious about the hidden pitfalls surrounding estate planning. Armed with the right questions, and an awareness of the problems that could be lurking, you can build a plan that is tailor-made for your family’s needs.

Breaking News: Rajiv’s New Book is Here!

We have big news! The long-awaited book by Rajiv Nagaich, called Your Retirement: Dream or Disaster, has been released and is now available to the public.  As a friend of AgingOptions, we know you’ll want to get your copy and spread the word.

You’ve heard Rajiv say it repeatedly: 70 percent of retirement plans will fail. If you know someone whose retirement turned into a nightmare when they were forced into a nursing home, went broke paying for care, or became a burden to their families – and you want to make sure it doesn’t happen to you – then this book is must-read.

Through stories, examples, and personal insights, Rajiv takes us along on his journey of expanding awareness about a problem that few are willing to talk about, yet it’s one that results in millions of Americans sleepwalking their way into their worst nightmares about aging. Rajiv lays bare the shortcomings of traditional retirement planning advice, exposes the biases many professionals have about what is best for older adults, and much more.

Rajiv then offers a solution: LifePlanning, his groundbreaking approach to retirement planning. Rajiv explains the essential planning steps and, most importantly, how to develop the framework for these elements to work in concert toward your most deeply held retirement goals.

Your retirement can be the exciting and fulfilling life you’ve always wanted it to be. Start by reading and sharing Rajiv’s important new book. And remember, Age On, everyone!

(originally reported at www.nextavenue.org)

Backlink? I can’t remember the topic for this article but I remember mentioning it. Maybe how to help parents with memory loss deal with their finances?  [GU1]