After working in the estate planning field for more than 20 years, we've seen several common omissions in estate plans drafted by inexperienced attorneys or online computer-generated forms. Those omissions include a failure to consider: tax planning, incapacity, divorce, spendthrift beneficiaries, beneficiaries with substance abuse issues, or the possibility of a beneficiary receiving government benefits. To protect your beneficiaries and help keep your assets safe, here are some reasons why you should consider addressing these topics in your estate plan:
Federal Gift and Estate Taxes
Federal Gift and Estate Tax is a tax on the wealth you accumulated or transferred during your lifetime. This tax typically is paid during the probate of your estate or administration of your trust. Too often we’ve seen clients pay more taxes than necessary because simple tax planning language was omitted in their estate plans. After a thorough review of your assets and consideration of your life circumstances, a good attorney will recognize if there is a need for special tax protection language in your estate plan. This language easily can be added to your estate plan and will protect your beneficiaries from hefty and unnecessary taxation.
Powers of Attorney for both health care and financial needs are the most basic and essential parts of a good estate plan. Yet, routinely, we meet with clients whose prior estate planning does not include either a Health Care Power of Attorney or a General Durable Power of Attorney. Anyone over the age of 18 should have a Power of Attorney for both health care and financial needs. Without these documents, the State will make decisions about your health and assets should you become incapacitated. If your attorney does not offer these as part of their estate plan package, you might want to consider looking for another attorney.
No one plans on a divorce when they get married, but it happens. For individuals with an existing prenuptial agreement, your estate plan should reference this agreement and comply with its terms. This is especially important with second marriages involving children. If you have a beneficiary going through a divorce, then you may want to offer them certain protections within your estate plan to keep your assets from being distributed to your beneficiary’s ex-spouse.
Everyone wants to believe their loved ones are perfect, but that’s not reality. Nearly every family we see seems to have a spendthrift, someone who simply cannot manage money for one reason or another, or a family member who struggles with alcohol, drugs or gambling. Fortunately, you can provide for beneficiaries who cannot or should not manage money. Additionally, you may have a beneficiary who is receiving governmental benefits. If such a beneficiary were to inherit your assets outright, there is a chance that they would no longer be eligible to receive their benefits without first spending down the inheritance that you left to them. There are ways to avoid this by utilizing trust planning. Within your estate plan you can appoint a Trustee to manage and distribute funds to these beneficiaries, according to your wishes. If your family members struggle with money management for one reason or another, or are receiving government benefits, you should ask your attorney if a trust might be warranted.
To provide your beneficiaries with the smoothest transition after your death, we recommend having your estate plan reviewed every 3-5 years by an experienced estate planning attorney. This includes a review of your Will, Trust, Trust funding documents and assets, Powers of Attorney, HIPAA Authorization, Living Will, and Prenuptial Agreement. If you are a business owner, this review should also include your Insurance Policies, Corporate formation documents, Annual Minutes, and Buy-Sell Agreement.
We offer free initial consultations regarding new or existing estate plans. At Davis & McCann, P. A. our focus is to provide the best legal advice in estate planning, farm family estate planning, Probate, Trust Administration, Medicaid and Long-term Care Planning, Family Business/Small Business Succession Planning, Real Estate Transactions, and related matters.
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