People that don’t have enough good information sometimes make estate planning errors that yield negative consequences. In this post, we will look at three common estate planning traps that you would do well to avoid.
Going It Alone
There are those that know they should put a plan in place, but they keep procrastinating for one reason or another. Some of these folks see ads placed by websites that sell do-it-yourself legal documents, including last wills. Going this route can seem like a good way to get it done and put the matter behind you once and for all.
In reality, this is not recommended. Legal professors that have examined these do-it-yourself documents found flaws, and they have stated that they can lead to unwanted outcomes.
If you are going to buy a house, and the owner of the home comes up with a set of documents that were not professionally prepared, what would you think? Most people would not enter into any type of significant agreement without some type of legal guidance.
This logic should certainly apply to your estate planning efforts. There is no reason to take any risks when qualified assistance is just a phone call away. While there is some expense involved, the investment can pay significant dividends in the long run.
Embracing Overly Simplistic Solutions
If you state your final wishes in a last will, the document would be admitted to probate. The executor would complete the hands-on administration tasks, and supervision would be provided by the court.
There are some drawbacks that go along with the probate process. It will take at least nine months for the court to probate an estate, and no inheritances can be distributed during this interim. Significant expenses accumulate, and probate records are available to the general public.
When people hear about probate, they sometimes do some research to find out if there is any way to sidestep it. There are some types of transfers that organically take place outside of probate, and they may look appealing on the surface.
One of them is joint tenancy with right of survivorship. If you own property, you can add a co-owner to the title or deed. This is the condition of joint tenancy, and it comes with right of survivorship.
After the death of one joint tenant, the other joint tenant would become the sole owner of the property. This transfer would not be subject to the probate process. That sounds simple enough, right? What could go wrong?
The joint tenant that you add to your ownership documents would assume 50 percent ownership of the property immediately. If this individual was required to pay damages after a legal action was initiated, the portion of the property that is owned by the joint tenant would fair game. The same dynamic would apply to the tax man if there are any tax problems.
This is one prime example, but there are some other asset transfer methods that fit into this category.
Failing to Consider Long-Term Care Costs
This may be an overstatement of the obvious, but you can’t leave your family inheritances if you have no money left at the time of your death. Unfortunately, for many people, this is a very real prospect because they fail to plan ahead to address potential nursing home costs.
In the areas where we practice, you are looking at about $150,000 for a year in a private room in a nursing home. The average length of stay is 12 months, and you can double the expenses if both you and your spouse ultimately require nursing home care.
Medicare does not pay for living assistance, so this is a very big deal. Medicaid will cover long-term care costs, but you cannot qualify if you have significant assets in your own name.
It is possible to take steps that will lead to eligibility without losing anything in the process, but you have to act well in advance to optimize your position.
Schedule a Remote Consultation!
Now is the time for action if you are going through life without an estate plan. To set up a consultation with an attorney from our Essex Junction, Vermont office, give us a call at 802-879-7133.
The number for people in Albany, New York is 518-389-6020, and there is a contact form on this website you can use to send us a message.