The thorniest problems in estate plans are often the most common and can be avoided if you know what to watch for.
Not finishing the estate plan. Unsigned paperwork, failing to fund a trust, or leaving a tough decision unresolved can hold up estate planning and administration for years.
Dying intestate (without a valid will) means assets are distributed by law, not according to your wishes. Here’s another wrinkle: if an old will is located, such as a trust or a will set up years ago, the old document becomes the controlling document, and assets will be distributed according to its directions. If the individual becomes incapacitated, any prior documents become controlling.
Keeping the estate plan a secret. Transparency is often an issue with families. Many people are as uncomfortable discussing money as they are loath to discuss death. Fights between siblings over what their parents intended can be prevented by having candid discussions with the family. Parents may be concerned about hurt feelings, especially if their plan results in unequal distributions or disinheritance.
There are cases where it’s best to keep plans private, especially if loved ones are strong-willed and each will negotiate for their own best interest to the detriment of others. Enlist the help of an estate planning attorney with experience in many of these situations to provide helpful guidance.
Failing to let the family know about different distributions. Even while they’re alive, parents rarely distribute assets equally. One child may have gotten a down payment on a home, while another received help for medical or mental health issues. Feelings of injustice can cast long shadows and derail an estate plan. The answer is not always as simple as determining what is “fair” in general, but what is fair for each family. In some cases, a mathematical split may keep the peace. In others, a conversation may be needed so the children understand how decisions were made.
This issue comes to a head in blended families. Should the biological children of one parent receive an inheritance from the other parent? Does the couple have biological children in addition to children from prior marriages? All these matters deserve frank discussions.
Neglecting to consider estate taxes. Few people need to worry about federal estate taxes. However, state estate taxes exist, and five state have inheritance taxes, with Maryland being the only state left subject to all three taxes. In community property states and common law states, there is a step-up in tax basis for investments and real property, which can provide a healthy tax break for heirs. A detailed analysis will help minimize tax liabilities for the estate and heirs.
Relying on AI to Write an Estate Plan. Think estate planning with AI is an easy and inexpensive process? AI estate plans often create more problems than they solve. Heirs frequently spend more time and money undoing the damage. Meet with a human estate planning attorney to create an estate plan to protect you and your family, and provide helpful insights based on their knowledge of the law, experience and family dynamics.
