Just Plain Talk: Avoid estate planning mistakes

Buz Livingston
Buz Livingston

Recently an online industry publication, Think Advisor, polled subscribers about critical mistakes they had seen clients make regarding estate planning.

A few years ago, I had minor surgery, and the nurses asked three times if I smoked. Approach estate planning similarly, review, then review again and once more.

A common mistake is not updating beneficiary designations on life insurance policies and retirement plans. Last month I had a client with a former spouse listed as a beneficiary on a life insurance policy.

They had changed the retirement plan beneficiary but had forgotten about the life insurance policy. People delay meeting with an attorney; perhaps they don't want to face mortality.

By some estimates, over half of Americans lack wills. Sometimes people put off writing a will because all their assets will pass by beneficiary designation, but this ignores the necessity of healthcare directives and living wills.

Often I'm asked would an online service work instead of an attorney. While online services are better than nothing and for simple estates may be appropriate, if you have a business, multiple properties, or a blended family, you have to use an attorney.

I was in a hurry when I had my first will written. Don't be like I was. Years later, when I looked at it, it was gibberish. The lawyer tried to tell me, but I didn't listen. Take your time and pay attention when the lawyer is talking.

Revocable trusts avoid probate, but only for assets titled in the name of the trust. Make sure assets are appropriately titled. Importantly, too, revocable trusts don't have creditor protection available in some states, like Florida, for jointly held assets.

Many times there's a valid reason for treating heirs differently. To avoid inter-family conflict, talk about it, or make alternative arrangements. With blended families common, be aware that joint tenancy means the first spouse to die disinherits their children. If you have charitable intent, it is always better to leave the IRA to the charity, not taxable accounts. IRA income is always taxable except for a charity.

Let your executor know where to look for the will. My dad had his in a safe deposit box, but a probate judge had to approve before we could open it. Some states require original wills, so it could be a big deal if no one can find the original.

Another potential problem is giving multiple people healthcare power of attorney, and they may disagree.

Estate planning documents like wills, trusts, and beneficiary designations are essential but don't overlook other ways to plan. It is relatively simple to record audio or video messages for your loved ones with today's technology. The size of your estate doesn't matter, either. Letting go can be difficult. Try to make it easier for those who remain.

You can't always get what you want, but Buz Livingston, CFP, can help you figure out what you need. For specific advice, visit livingstonfinancial.net or drop by, masked, 2050 West County Highway 30A, M1 Suite 230.