There is no question that most people appear quite serious about preparing an estate plan that can get passed along to future generations. The intention is all there but too many people still seem to find ways to mess it up entirely.
According to Larry J. Tolbert, regional vice president of Householder Group, an independent financial-planning firm (
1. Having No Plan Whatsoever. Clearly, that would seem to be the most distressing mistake. Tolbert says that no plan is simply a plan for disaster and he couldn’t be more correct. Why do people even go in this direction? Tolbert feels that it may stem from being somewhat overwhelmed at the mere mention of such a subject as estate planning. After all, we’re talking about one’s own mortality. And then, as Tolbert points out, there are people who believe they don’t have enough money to warrant an estate plan.Keep one thing in mind. Today’s Baby Boomers have the most money of anyone and there are 78 million of them in the United States alone. So what happens when you don’t take it serious enough and you don’t have an estate plan? How about leaving everything to the IRS? Is that the legacy you want?
2. Trying to Do It Yourself. Everyone knows the phrase about a lawyer who has himself as a client has indeed a fool for a client. Very true, indeed.
The same applies to estate planning. So, if you decide to do it yourself and you don’t know what you are doing (which is generally the case), then it’s going to cost you considerable amounts to get yourself out of the eventual hot water. These mistakes usually involved badly written paragraphs, or those that can be interpreted in a number of ways. Also, as Tolbert emphasizes, don’t forget those documents that are simply out of date, or those that have improper beneficiary designations, or those that are simply not executed correctly.
3. No Transfer of Assets. This is commonly called “underfunding,” where the estate plan has been well drawn but no one has taken the time to transfer assets into it. Oft-times the person drafting the plan does not advise the client what has to be done following its execution. The plan, keep in mind, has to be funded.
4. I Forgot Something. A very common mistake and usually it involves an IRA. Tolbert says that a body of law known as ERISA covers retirement plans, such as traditional IRAs and 401(k) plans. “These are among the few assets that have a named beneficiary, thus avoiding probate.”
However, he notes that in many instances, people do no not plan for the combined effect of estate and income tax that may await them. For that matter, they may not consider that joint taxes alone might cause the beneficiary of an IRA to lose more than 70 percent of its value to taxes. “Stretching an IRA can turn your retirement asset into a family dynasty if handled properly.”So, what’s the answer? Thought you would never ask. You need an experienced and trusted estate planner to sort it all out. And remember the old adage that you get what you pay for. In the long run, you’re better off retaining a good estate planner at the beginning instead of relying on doing it yourself or worst of all, not doing anything.
