Even Texans who take the steps to create an estate plan might not have implemented all the correct strategies based on their individual circumstances. There are certain mistakes that people will commonly make when they are drafting estate planning documents. These can negatively affect asset distribution and other matters after they have passed on. People need to be cognizant of legacy planning. Understanding the errors that are commonly made is a way to avoid repeating them.
It is wise to consider a see-through provision when using a trust. Failure to do so can be expensive. If, for example, a couple has an Individual Retirement Account with $1 million in it with the IRA beneficiary a trust, the estate might be subject to significant fees reaching hundreds of thousands of dollars if there is no see-through provision. This is because there are higher tax rates on trusts. The see-through trust meets the legal needs for the beneficiary to be the IRA.
Another issue that often arises is an issue with a Schedule. The Schedule is the attachment to the trust that will have details regarding the trust. If the Schedule is blank or incomplete, it will not be known as to what assets have been transferred to the trust. Failing to do so can damage trusts and prevent them from being distributed as the testator wants. Payable on death (POD) and transfer on death (TOD) let the beneficiary get assets and not have to deal with probate. Without these instructions, probate might be necessary. It can be costly to the beneficiaries.
Some people have several accounts. This can be complicated and problematic. Since there is a limit of $250,000 on the insurance the FDIC will give accounts, the accounts might not be protected. Consolidation is a smart strategy to avoid this. Finally, there should be an inventory of assets. The documents could be completed, but if the loved ones do not know how to find them, it can make the process difficult. The birth certificate, burial instructions, Social Security card and other documents should be listed as to their location.
For those who are preparing to make their estate plan, having a grasp on these issues is vital. A legal professional who is experienced in estate planning can help with every aspect to make certain these common mistakes are avoided.
Source: Kiplinger.com, “Some of the Biggest Estate-Planning Mistakes People Make,” Andrew McNair, May 2017