9 Common Pitfalls in an Estate Plan

9 pitfalls in an estate plan

Introduction to Estate Planning Pitfalls


Death is an inevitable part of life. As such, having a comprehensive estate plan in place is vital. Unfortunately, many people do not adequately address their estate plan or even ignore it.


Estate plans outline strategies to safeguard your assets through wills, trusts, powers of attorney, and health care directives. These tools dictate how your assets will be distributed upon your death. Together, these components provide a roadmap for handling your assets, caring for your loved ones, and even making critical medical decisions should the need arise.


#1 Ignoring the Need for a Comprehensive Estate Plan


A comprehensive estate plan should address all aspects of your estate. Assets named in your plan should include financial accounts, real estate, digital assets, and personal belongings. The absence of a comprehensive estate plan will leave your estate in limbo during the lengthy probate process. 


Failure to properly plan for your death may result in your assets being distributed contrary to your wishes, disputes among heirs, or financial loss due to avoidable taxes and fees. By avoiding these pitfalls, you’ll ensure your estate is smoothly handled while sparing your family additional headaches during a difficult time.


#2 Failing to Update Your Estate Plan Regularly


Life is full of changes, including marriages, divorces, deaths, and acquisitions of new assets. Because life changes so frequently, you must update your estate plan regularly to keep pace. Failure to do so will lead to an estate plan that does not accurately express your intent upon death. Luckily, most estate plans are revocable and can be changed if needed.


Imagine you create an estate plan stating your desire to give your son your Honda Civic. After completing the estate plan, you sell that Honda Civic and buy a Volkswagon Beetle. You want your son to inherit the Volkswagon Beetle when you are gone, but your estate plan only references the Honda Civic.


Your estate plan will not automatically be updated to accommodate such a change in that situation. If you want to name the Volkswagon Beetle specifically, the car will likely pass intestate. Your wish for your son to inherit your vehicle will not be honored due to an easily avoidable failure to update your estate plan’s language.


#3 Overlooking Digital Assets in Your Estate Plan


In today’s digital age, estate planning must extend beyond tangible property. Digital assets, like cryptocurrency and social media profiles, must be accounted for. Your digital legacy should be as meticulously managed as your physical legacy. Start by keeping an updated list of all digital assets you own. Be sure to include emails, usernames, and passwords that can be accessed by those responsible for your estate’s distribution. 


Make sure your estate plan explicitly includes your digital assets. Grant someone the authority to handle your online financial accounts and distribute digital items with sentimental value. Include whether you want specific information kept private or deleted altogether. 


Including a durable power of attorney is an intelligent choice. A power of attorney authorizes a trusted individual to manage your affairs, including digital assets, if you cannot do so. Make sure to review and update the directives concerning your digital assets regularly. As your digital life evolves, so should your estate plan.


#4 Understanding the Impact of State Laws


Florida state law has unique implications for your estate plan. Understanding and abiding by Florida’s legal requirements will ensure your state plan achieves the intended result without complication. Here are some rules to be aware of:


Will Contests: In Florida, penalty clauses for contesting a will are unenforceable. This limitation may add a layer of complexity if a disgruntled family member wishes to contest your will.


Out-of-State Estate Planning Documents: Out-of-state estate planning documents are generally recognized in Florida. They must comply with the legal requirements of the state where they originated. 


Trust Funding: Trusts avoid probate and offer controlled asset management. To be effective, make sure that your trust is adequately funded. 


Living Wills and End-of-Life Decisions: A living will in Florida is not a will in the traditional sense. Instead, it’s a document expressing your preferences regarding end-of-life medical care in the event you become incapacitated.


Lady Bird Deeds: This special deed allows property owners to retain control over their property during their lifetime while automatically transferring the property to a designated beneficiary upon the owner’s death. This mechanism simplifies and avoids ancillary probate for out-of-state residents.


It’s essential to consider these considerations when drafting your estate plan. Speak to a Florida estate planning attorney to guide you through these rules and state-specific considerations.


#5 Not Properly Structuring Trusts


Florida trusts can encounter a variety of administrative problems. Avoiding common issues up-front can prevent costly delays down the line. Here are some common  mistakes to look out for:

Beneficiary Death or Incapacity: Trustees must verify that all designated beneficiaries can receive their distributions. If a beneficiary has passed away or become incapacitated, legal guidance on how to proceed is required. One suggestion is to incorporate contingent beneficiaries within the trust document. These “backup” beneficiaries provide a clear path forward in these situations.


Irrelevant Provisions: Irrelevant provisions can necessitate judicial intervention to appropriately interpret or modify the trust’s terms. Judicial intervention is costly and can easily be avoided through careful drafting.


Disagreement Amongst Beneficiaries: Disagreements regarding the trustee’s discretionary powers in asset distribution or the terms of the trust itself are common. If these disputes escalate to litigation, administration costs may rise exponentially.


It’s a great idea to consult an attorney to avoid trust administration dilemmas. It’s important to note that establishing a Florida trust requires titling assets in the trust’s name. This process is known as funding the trust. If the trust is not adequately funded, it will not be recognized under Florida law.


#6 Misunderstand the Role and Powers of a Power of Attorney


Selecting the right person to act as your agent under a Power of Attorney is especially important if you are ill or likely to become incapacitated. Power of Attorney allows someone else to make crucial decisions on your behalf. These decisions can range from finances to healthcare. Your agent with Power of Attorney should always act in your best interest.


Trustworthiness is the key consideration when selecting someone to act under the Power of Attorney. This individual will have significant control over your affairs. Despite this considerable authority, the agent’s powers are confined to the scope of the document that grants them power. A Power of Attorney never extends beyond the principal’s death. 


#7 Neglecting to Plan for Disability or Incapacity


Advance care planning involves preparing for unexpected medical emergencies that might leave you incapable of communicating your healthcare preferences. It is critical to have meaningful conversations with your loved ones and to complete legal documents such as advance directives, which can help ensure that your healthcare wishes are respected and followed.


Advance directives are legal documents that dictate your healthcare preferences when you cannot communicate. Examples include:


Living Will: This document outlines your medical treatment preferences in emergencies, specifying the medical interventions you desire or decline.


Durable Power of Attorney for Health Care: When you appoint a healthcare proxy, you name someone to make medical decisions for you in emergencies or illnesses.


It is essential to review and update emergency plans periodically to ensure they remain effective in protecting your loved ones and assets in case of a medical crisis.


#8 Assuming Estate Planning is Only for the Wealthy


Unfortunately, many people neglect careful estate planning out of a common misconception that such planning is only for the wealthy. This belief could not be further from the truth. Estate planning provides essential benefits for individuals at any financial level. No matter the size or worth of your assets, you want to ensure they are distributed according to your wishes. Remember, your estate plan should include any family heirlooms–items that may not have a high monetary value but hold significance to your family.


#9 Business Succession Planning: A Common Oversight


Deciding what happens to your business after you pass away is an often overlooked aspect of estate planning. However, it’s crucial to have a plan to ensure a smooth transition of ownership and management of your company upon your death. Business succession planning involves identifying future ownership, valuing your business, and considering the tax implications of planned transfers. A succession plan ensures your company’s legacy will continue with or without your daily involvement.


Navigate Estate Planning With Professional Help


Guidance from estate planning attorneys will make the process manageable and effective. Estate planning attorneys offer guidance customized to your unique circumstances. By relying on the pros, you’ll avoid common pitfalls and ensure your estate plan reflects your true intentions. It’s the best way to ensure your loved ones will be cared for in your absence.


Should you need to discuss your estate planning please feel free to contact us to schedule a consultation at info@aventuslawgroup.com or 321-250-3577.

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