Last month, we started listing the Top Ten Most Common Misconceptions and Mistakes that people make in estate planning. Over the years, our clients have shared with us what they have heard and what they understand to be the law and believe to be good planning for their disability and death. This information comes from the Internet, television, newspaper or magazine articles, and friends or family members (some of whom may even be lawyers). One problem with gathering information this way is that, while the information may be correct, what may be appropriate for one person, or situation, may not be appropriate for another person or situation. The other problem is that the information is often just plain wrong.
Following are the last of what we consider to be the Top Ten Most Common Misconceptions and Mistakes people make when planning:
- Failing to include additional powers in a Power of Attorney. Forms for Powers of Attorney for Health Care and Property are fairly easy to find and prepare. But will they do what you need them to do when you need them to do it? Illinois has a statutory form for each type of Power of Attorney, which is most recognized by medical and financial institutions; however, these statutory forms do not include many powers that are often necessary for your circumstances. It is important that these documents are properly executed, are effective at the time they are needed, and include additional powers to allow your agent to help you if disaster strikes.
- Failing to properly provide for special beneficiaries (e.g., minors, disabled, spendthrift). Some of the beneficiaries you wish to name in your Will or Living Trust, or on your life insurance policies or retirement accounts, may not be able to manage their inheritance due to special circumstances. Perhaps they are under age 18, or have a disability which prevents them from taking care of themselves or for which they are receiving governmental aid. Or maybe they are adults who are in the midst of a divorce, or who are not the best money managers, or who just make poor life decisions. For any of these beneficiaries, having their inheritance held in a Trust and managed for their benefit likely would be better than an outright gift to them. This type of planning can be accomplished through a Revocable Living Trust or other trusts for their benefit.
- Adding a child as a joint owner on accounts or real estate. Many people wish to have an adult child or other trusted individual help them pay bills and manage their finances, so they add this person as a co-owner on bank and other financial accounts, or even on the title to their home. This is a bad idea. Adding someone as a joint owner results in your assets being at risk in the event the added joint owner is sued (maybe for a car accident or failure to pay debts), divorces his or her spouse, or just decides that they need some money for him or herself. And what happens at your death? The surviving joint owner becomes the sole owner of the asset. Was this your intent?
- Creating a Revocable Living Trust and failing to fund it. We meet with countless clients who have a carefully (or not so carefully) drafted Revocable Living Trust, which is perfectly valid and enforceable, but which is completely or partially “unfunded”. In other words, they have failed to “connect” their assets to the Trust, so the terms of the Trust will not control where their assets pass upon their death. Once you create a Revocable Living Trust, you must change the ownership and beneficiary designations on your assets and accounts so that they are titled in, or payable to, your Revocable Living Trust.
- Doing nothing, or sometimes even worse -trying to do it yourself! Does it seem overwhelming to think about all of these issues? Or do you think you can prepare your own estate plan with the help of low-cost programs available on the Internet or forms that you obtain on your own? Doing nothing will result in the state imposing its estate plan on you and your family, often with unintended and costly results. Doing it yourself will save you money now, but will likely result in additional time and expense for your family after you become disabled or die, if you did not consider all circumstances and properly prepare your documents and take the steps to implement your plan.
At a minimum, everyone over the age of 18 should have Health Care and Property Powers of Attorney. And a Will if they have any assets at all.
If you have questions about any of these concepts, we would be happy to discuss them with you. Contact Waltz, Palmer & Dawson, LLC at (847) 253-8800 or contact us online to schedule a no-charge initial consultation with one of our estate planning attorneys to be sure you get the correct information and understand how it applies to your personal situation.
Waltz, Palmer & Dawson, LLC is a full-service law firm with various areas of expertise to assist you and your business, including: Business Law, Commercial Real Estate, Estate Planning, Wills and Trusts, Probate, Guardianship, Family Law and Litigation.
This article constitutes attorney advertising. The material is for informational purposes only and does not constitute legal advice.