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Estate Planning Mistakes

3 Biggest Estate Planning Mistakes

3 BIGGEST Common Estate Planning Mistakes (Video)

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What are 3 mistakes that can cost a LOT of money and take away control?

I’m going to cover the 3 big mistakes that can cost a lot of money and take away control. Then I’ll tell you how to fix them.

Hi. I’m Gary the owner of DeWitt Law. You know you need a plan. Its time to start. Schedule your free meeting at DeWitt dot law.

The #3 mistake is not having durable powers of attorney.

Without a durable power of attorney, your family is powerless to help you if you are injured, sick, or develop dementia. They will have to go to court to get permission to manage your affairs and sign your name.

If you are unable to manage your affairs and do not have a Power of Attorney, a judge may have to appoint someone to act for you in a legal proceeding called a Guardianship. A Guardianship is very expensive, and your personal and financial information become public. In a Guardianship, the Judge takes control away from you and gives it to somebody else. They now have the legal authority to make your decisions and manage your money and property for you.

A guardianship costs $3,000 or more.

You can’t “get” a power of attorney over somebody. A power of attorney must be given. You would have to “get” a guardianship from a Judge.

Comprehensive, up-to-date Power of Attorney documents can avoid a costly guardianship trial.

With Powers of Attorney, you get to decide who is in control and how much power they have.

The same for healthcare. Without your written permission, your family is powerless to make healthcare decisions on your behalf.

Even your spouse doesn’t have the power to make your decisions. The law considers an adult to be an individual and in control of their own decisions. You don’t automatically have permission to make your spouse’s decisions because of marriage.

A Durable Power of Attorney lets you decide who will be in control and how much power they have instead of a Judge.

The #2 mistake is trying to plan on your own without understanding the long term consequences.

If you put somebody else on the house or accounts and they drive, everybody else on the road is a potential lawsuit waiting to happen. One accident is all it takes to end up losing your house and money to them. It doesn’t matter how financially responsible the other person you put on the deed or account is. If they have an auto accident, then your house and money are up for grabs in the lawsuit that will follow.

If they end up with huge medical bills due to a medical incident or accident, your house and money are exposed to their medical expenses.

And, to top it all off, if you want ownership back later, it may be difficult to impossible to remove them because they’ll have to sign it back over to you.

The moral of the story is, don’t put children on the deeds or accounts. You have better ways, like a durable power of attorney, to accomplish the same things.

And the #1 mistake is having the do nothing plan. If you do nothing, the state will be in charge of your decisions and estate.

People who do nothing still have a plan, because if they don’t write their own plan, then the state has written one for them. The state legislature has passed laws that dictate what happens to you and your stuff.

You and your family don’t get a say in how your estate is divided.

Your loved ones end up in probate court to get everything settled. And, during probate, your personal and financial affairs are made public in a process that can take many months or years.

It’s time to plan. Schedule your free meeting at DeWitt dot law.

3 Types of Estate Planning

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Do Nothing Plan

  • Put your family through the pain of probate with its gigantic legal fees, aggravations, and wasted time before they get their inheritance
  • The State through a Judge, not you, decides who gets what, when, how, and how much
  • In case of your incapacity, a Judge picks who is in charge, not you
  • Lose privacy of the contents of your estate and personal affairs to the public court record meaning financial predators can easily prey on your family
  • Usually the most expensive plan of all – in time, money, and aggravation

Do It Yourself Plan

  • One mistake could turn your entire plan into a do nothing plan meaning your family will face the pain of probate with its gigantic legal fees, aggravations, and wasted time
  • You decide who gets what, when, how, and how much.  You decide who is in charge if you can’t be
  • Easy to make mistakes because of the complexity of the language and “terms of art”
  • One commonly made mistake could cost you half of what you have while living even if it isn’t your fault
  • You don’t get do overs. Mistakes are paid for by you and your family. Online services are not law firms, but document preparation companies that waive all liability for mistakes. One mistake could make it a do nothing plan.

Work With an Attorney

  • Save your loved ones from the pain of probate, its gigantic legal fees, wasted time, and aggravations
  • Stop frustrations, stress, worries and aggravation before they start
  • You decide who makes decisions and how stuff is distributed, not the State through a Judge. You decide who is in charge.
  • Keep your private affairs and worth private
  • Get professional advice, counseling, and coaching every step of the way

What’s Wrong with a One Page Will? (Video)

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What happens when you have a one page will?

Hi. I’m Gary the owner of DeWitt Law Firm. We are with you every step of the way. Get started now by going to dewitt dot law.

What’s left out can really hurt with a Will.

Recently I had a client come in with his dad’s will. It was one page of text and one page for signatures. Literally a one page will.

In the will dad had left everything to my client. However, he didn’t mention his other 3 children in the will that he wanted left out. Under Arkansas law, those children are entitled to a share of the estate. Worse yet, those children were estranged and we are having to hunt down their addresses, if they are even still around. I’ll have to send notice to their found address and hope they respond. If not, then the Judge will decide if the estate is in limbo or if my client takes all…

Another downfall of this one page will is it didn’t give the executor any authority to do anything. Again, under Arkansas law, you can either use the authority given in the will to do things, or state law. Because the will didn’t explicitly grant any authority, we’ll have to ask the judge for permission to do each and every little step.

The third mistake is that there is no self proving affidavit of the witnesses signatures. I may have to find the witnesses and have them sign affidavits that it is their signature. If I can find them.

Get started by going to dewitt dot law.

One Mistake

One Mistake Can Cost You Half

Click Here to Talk About Your Alternatives

This one common mistake could cost you half your house and/or half your money. This one common mistake could cost your children a hefty tax bill.

I see people almost every day that have made this mistake and don’t realize the consequences.

What is the mistake? Putting your children on the accounts as co-owners of your accounts or on your deed.

Here are some of the consequences you may not have foreseen:

  • If your child gets divorced, do you want their spouse to get half your home and accounts?
  • If your child gets in an at fault accident, do you want the other person to get half your home and account?
  • If your child gets in IRS trouble, do you want the IRS to put a lien against your house?
  • If your child gets in credit problems, even if it isn’t their fault, do you want to have to fight their creditors to keep your money?
  • If you want to sell the house, do you want to give half the money to your child?
  • If you put your child on the deed to your house
    • They will owe capital gains tax on their half based on what you paid for the house
    • You’ve just pushed probate off onto the next generation

You have good alternatives to protect your money and home while allowing your children to manage your money if you can’t.

Click Here to Setup a Call to Learn What to do Instead
What Happens if you don't have a will?

What Happens When You Don’t Have a Will? (Video)

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What happens if you don’t have a Will? If you don’t have a Will, your final estate is subject to what is called administration.  It is much like Probate only who gets how much has already been determined by state law.

Without a Will, the state, not you, decides who gets how much.  When is decided by whether of not the family quarrels.  But it will take at least 8 months to get done.  And it will cost your family at least 6% of the estate to get it done.

Every step of the administration process will happen under the scrutiny of a Judge for correctness.  A Judge must approve every decision. If even one family member objects, then the entire process could take years and lose the estate a lot of money.

First, your spouse only gets a portion of your estate.  In Arkansas, your spouse gets 1/3rdof personal property, that is everything that isn’t real estate.  You children split the other 2/3rds evenly between them.  If they can’t agree on what property they will each take, then the court will order everything sold and the money split.

What Happens if you don't have a will?

Your spouse gets an interest in the real estate called a fractional life estate.  This means she can live there and collect rents and royalties for the remainder of life.  However, your spouse can’t sell the property without your children’s permission.  Then your spouse only gets part of the money from the sale. The children get the property as tenants in common after your spouse passes.

A Last Will and Testament is just one part of a complete estate plan.

What happens if you don’t have a Will?

  • The government decides who gets what and how much
  • The government decides who will be in charge
  • You lose all control and your wishes aren’t carried out
putting off estate planning

Putting off Estate Planning (Video)

Putting off estate planning is one of the biggest estate planning mistakes people make.

Transcript of Putting Off Estate Planning Video

Hi, I’m Gary DeWitt.  I own DeWitt Law Firm where I do estate planning and probate and do it well.

We all feel like tomorrow will always come.  But, what if?

Talk to me, get questions answered, or get estate planning help at your free meeting.  Visit www.planwithgary.com to setup a time for your free meeting.  That’s planwithgary.com.

We all feel like tomorrow will always come.  You always have a date to procrastinate and put things off to. 

And, while that makes you feel good today, it also creates tremendous stress because you KNOW in your heart that you are not making a good choice. 

You keep putting planning off because of the feeling that tomorrow will always come.

But the reality is that tomorrow might not come.

putting off estate planning

Thankfully, there is good news.  Planning that’s simple, easy to understand, and takes little effort on your part because I’ve done the hard work for you. 

Planning that’s the difference between living a better, stress free life and worrying about what is to come. 

Talk to me, get questions answered, or get estate planning help at your free meeting.  Visit www.planwithgary.com to setup a time for your free meeting.  That’s planwithgary.com.

Thanks for watching.

Summary

If you don’t have an estate plan already or know how important planning is, but keep putting it off, you need to get started soon. Sooner is better than later. Remember the 80/20 rule. 20% of an estate plan is going to cover 80% of your needs. It is better to get that 20% in place now to handle the 80%, rather than let the government decide 100% later how your affairs are handled and estate distributed.

Estate Planning Academy Episode 16: Joint Tenancy

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Joint Tenancy
Joint Tenancy

Joint Tenancy

  • Joint tenancy is often though of as putting somebody else on the deed with you
  • Magic Language – “as joint tenants with the right of survivorship” OR “husband and wife”
  • Each person has equal access to the property
  • Avoids probate as to the people on the deed

Problems with Joint Tenancy

  • Only delays probate
  • Causes Medicaid qualification problems
  • If both tenants pass at same time, two probates may be required to clear the title
  • When blended families are involved, with children from previous marriages, here’s what could happen: the husband passes then the wife becomes the owner of the property. When the wife dies, the property goes to her children, leaving nothing for the husband’s children.
  • It takes all owners to sign the deed and contract for sale of the property.

Gift Tax

  • When you place a non-spouse on your property as a joint tenant, you make a gift of property every time that joint tenant takes property out of the account.
  • For example, when a mother retitles her $80,000 account in Joint Tenancy with her son, she makes a gift to her son every time he makes withdrawals. This may not be the most efficient use of her $14,000 annual exclusion.
  • The main point is that the gift is unintentional and not carefully planned

Estate Planning for Blended Families

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What is a Blended Family?

A blended family is when two people that have children from prior marriages marry.

Blended Family Problems

After her father passed away, Mary remained close to her step-mom, Helen, over the years. Helen choose a few years before her death to move closer to her own biological children and left the area. After Helen passed away, Mary discovered her step-mom had changed the terms of her estate plan to leave everything to her own biological children.

Everything that Helen did was legal.  Helen’s husband, Mary’s father, signed an estate plan that left Helen in 100% control of the estate.  As the survivor, Helen had full control to amend and modify the plan.

Spouses can Separate Assets and Have Individual Trusts

Upon the passing of the first spouse, a Trust can establish a sub-Trust to provide income to the spouse but protect the assets from their children.

Choose the Trustee carefully.  The surviving spouse should not be the Trustee.  The Trustee will have the power to withdraw all the assets from the sub-Trust.

Consider giving children a gift on the first to pass.  That way the surviving spouse can use all the assets remaining if they need them.

Make a Joint Trust Irrevocable

When the first spouse passes, have a clause in the Trust that it becomes irrevocable.  In sense, locking the assets in the Trust.

Consider Keeping Assets Separate

Think about keeping your separate assets in a separate account.  Name your children as the beneficiaries of those assets and accounts.

Consider Your Attorney-in-Fact

Think about naming your spouse and children as co-attorney-in-fact for your power of attorney.

Double Check Beneficiary Designations

Beneficiary designations occur outside a Will or Trust, but are important pieces of an overall estate plan. Regardless of what your Will or Trust says, beneficiary designations go directly to the beneficiaries.  If your Trust is not the beneficiary, then the assets don’t go to the Trust.

For example, if mom’s brokerage account has a beneficiary designation of her children, then her children take all regardless of what her Will or Trust says.

Another issue is when somebody names their spouse as 100%primary beneficiary and their children as the secondary.  If they pass while their spouse is living,then their spouse gets 100% of the money and 100% of the control over that money or asset.  You can avoid this by naming your spouse and children all as primary beneficiaries and designating percentages.

Also, make sure to double check your beneficiary designations on all your accounts at least every 2 years, preferably every year.  If you make a change to your beneficiaries,then check them about 6 months later to make sure everything was entered correctly.

Avoid Problems with a Living Trust

A Trust can avoid step-parents from changing the disposition of your parent’s property.

You give ownership of your property to your Living Trust.  You don’t own the property in your own name, but you still have full control and dominion over your property.  Your Living Trust owns your property.  You own your Living Trust.

Many people are scared because they think they are giving up control and dominion over their property. That just isn’t the case.  You make the trust, put property into the trust, and have the benefit of the trust property.  You and you alone control the trust, and therefore the property in the trust. You can buy, sell, trade, mortgage, lend, borrow just as before you created your Living Trust.

In short: the fact your Trust owns the property makes no or little difference on the way you live and conduct your affairs.

The big difference happens later, when you pass on.  Because of the way a Trust is structured,your successor Trustee steps in and follows the directions you left in the Trust.  Because you didn’t own the property in your name, there is no probate to be done.  There’s no publicity, and compared to a Probate, little expense, or convenience, or time spent for your loved ones.

Your parent and step-parent can agree now how the assets are to be distributed and when they are to be distributed.  Once your parent passes, their part of the Trust becomes irrevocable (can’t be changed). 

The Living Trust also helps if you are incapacitated.  It helps you avoid the indignity of a Guardianship.  A Living Trust names somebody to manage the assets in Trust if you lose the ability to manage your own affairs, perhaps due to dementia.

Not Just for the Wealthy

Trusts aren’t just for the wealthy.

If you have just a $100,000 estate, they financial cost would be $6,000 (in today’s dollars).

Let’s say that is a house that should appreciate at 5% per year.  In 10 years, it’s worth about$163,000.  The cost of probate is now$9,780.  That’s 50% more in just 10 years.

If you created a trust and put the house in it, you spend$2,000 today.  Your family saves $7,780 or more later…  Not to mention the time and anguish of Probate.

Just imagine the cost of Probate in 20 years. (Its actually about $16,000 for that $100,000 house.)

Estate Planning Academy Episode 13: I have a Revocable Living Trust, Now What?

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Espisode 13: I have a Revocable Living Trust, Now What?
Episode 13

The Biggest Mistake

The biggest mistake I see with a revocable living trust is creating it, doing some funding, but not finishing the job…

Just because you have a Trust, doesn’t mean it is a setup and forget thing

A Trust is a “living” document.  In addition to the initial setup, a Trust needs to be maintained and reviewed from time to time.

Your Trust Must be Funded

  • An empty Trust doesn’t do you any good
  • An empty Trust is called a “dry Trust.” A Trust is required to have some property in it.
  • If you let the Trust run out of property, it becomes invalid!
  • Property not in your Trust is subject to Probate

What to put into your Revocable Living Trust

  • Your Home and other real estate. At DeWitt Law, we always create a deed to move your home into trust
  • Your Savings Accounts
  • Your CDs
  • Your Checking Accounts
    • Your bank can help make the changes of ownership
  • Non-Retirement investment accounts
  • Stocks
  • Bonds
  • All personal property which is anything but real estate
    • But not cars and boats
    • At DeWitt Law, we move all your personal property to your Trust

When to name your trust as beneficiary

  • I always recommend that your Trust be at least the final beneficiary on your
    • Life Insurance
    • Retirement Accounts (IRAs and 401(k)’s)
  • Any other accounts that need special handling and are subject to IRS rules
  • If you do this, then as a couple you make sure the money flows into the trust and is distributed, especially for minors, as you want
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Blended Family Horror Story

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I know a family whose dad passed away last year and left the vast majority of his property to the step-mom by operation of law after 20+ years of marriage.  That is, no Will or Trust required.  When step-mom passed, she left everything of hers (what was his) to only her children.

This story illustrates the problem of blended families.  While what she did is not right, it is not illegal.  She was given the property.  It was hers to decide what to do with.  Dad didn’t have any say in the matter.  Step-mom made sure her children were well taken care of while cutting her step-children out completely.

Even if step-mom hadn’t created a Trust in her last days, leaving everything to only her children, the results would have been the same.  Under Arkansas law, without a Will or Trust, your property will be divided between only your biological and adopted children.

What can stop this from happening?

  1. Adopt the children. It becomes more difficult to cut out adopted children.
  2. Create a trust and spell out exactly how the property is to be divided

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Northwest Arkansas Estate Planning Attorney Gary DeWitt helps individuals with estate and life planning for living, protecting, and passing by providing solid representation. Gary offers multiple services to accomplish your goals including: corporate services and support for businesses; estate planning, wills, trusts, power of attorney, medical power of attorney for individuals and families; general small business law; long term care, nursing home, Medicaid, charitable planning; charitable giving; special needs planning; disability planning; Medicaid emergency planning; probate; intestate succession; and general asset protection.

Address – Office in Springdale

DeWitt Law Firm, PLLC
986 Elmwood Street
Suite D,
Springdale, AR72762
Phone: 479-717-6300
Fax: 479-717-6307

When you need assistance in making your estate plan, or you need your plan checked over in the Northwest Arkansas area, estate planning attorney Gary DeWitt can help you out.  Planning for Peace of Mind and Quality of Life.

Give us a call now at 479-717-6300

We help families and businesses throughout all of Northwest Arkansas, Benton County, Washington County including Bella Vista, Bentonville, Rogers, Lowell, Springdale, Centerton, Gravette, Avoca, Cave Springs, Fayetteville Arkansas, & Farmington with Estate Planning, Probate, and Business.

Use of this site or website does constitute legal advice and is for education only.