Although formulating an estate and long term care plan is an important step towards financial security, many people fail to have even the most basic plan and advanced directives. One potential hurdle is a fear of putting together a poor plan. Having a basic understanding of these common mistakes can help reduce the risk of making some unfortunate errors. The following are examples of the most common errors made:
1. Failing to create an estate and elder law plan: Arguably the most common mistake is simply failing to create any estate and long term care plan. Without any written plan whatsoever, your intended wishes as to who will receive your estate and handle your affairs may go by the wayside. Without a Last Will and/or Trust, the laws governing intestate distribution (not your wishes) will control who will receive your estate and virtually anyone can apply to be the administrator of your estate.
Additionally, without a long term care plan you may end up utilizing all of your savings for your long term care needs and never be able to take advantage of any government program that will pay for said needs. The lack of an estate plan can also result in your estate not taking advantage of any available estate tax credits and exclusions. A variety of legal tools can help to better ensure that your loved ones or preferred charitable organizations benefit from your estate — not the IRS and/or New York State.
2. Not revisiting/updating your estate and long term care plan: An estate plan and long term care plan should be revisited with any major life event. This includes births, deaths, marriages and divorces. It is also wise to review an estate plan on a regular basis even without these major changes. For example, any changes in estate tax and income tax laws should be considered on a regular basis when reviewing one’s existing plan. Additionally, the rules for Medicaid eligibility should be consulted and considered.
3. Utilizing only a Last Will as your planning tool: A Will is just one of many documents that can aide in the transfer of assets. A trust may also be beneficial. Trusts allow the trustor, or owner of the assets, to avoid probate. Probate is the court process that a Will goes through before the assets are distributed. This process is public and can be arduous and costly. Trusts can be established to avoid this process and, depending on the language used to create the trust, can also take advantage of tax savings, protect assets from the cost of long term care, shelter assets from creditors and allow the owner to have more control over how the assets are used.
4. Neglecting beneficiary designations: Designations on life insurance policies, retirement plans and other beneficiary designations should also be updated with any major life event. Additionally, it is most important that named alternate beneficiaries are named for said assets. For example, if no alternate beneficiary is named, the default beneficiary would be your estate, which could result in creditors/Medicaid against said assets. These documents generally are not governed by a will, trust or divorce decree. As a result, an unintended beneficiary could remain a recipient.
These are a few of the more common mistakes that are made when putting together an estate and elder law plan. Those that are either in the initial stages of estate and/or elder law planning or looking to revise their plans are wise to seek the counsel of an experienced estate and elder law planning attorney. This lawyer will be able to discuss the various tools that can help you meet your goals and can better ensure a plan is tailored fit to meet your needs.