How to Avoid Mistakes in your Parents’ Estate Plan
Recently, I was asked an interesting question: What should I look out for with my parents’ estate plan?
This is a great question! As an estate planning attorney, there are many problems that I encounter while reviewing an old estate plan. You will find a list of five potential major mistakes with your parents’ estate plan.
An Outdated Last Will and Testament in Parents’ Estate Plan
A common mistake that I see is an outdated Last Will and Testament. The problem is that the parents established the document when the children were young. Unfortunately, when it comes to probating this old Last Will and Testament, many times the family’s wishes have changed (even though this is what they wanted when they established the Will). In addition, a Last Will and Testament usually results in a 10-month to 2-year or longer probate court proceeding, costing tens of thousands of dollars.
Outdated Powers of Attorneys and Advanced Healthcare Directives
Another common mistake that we see are outdated powers of attorney and advanced healthcare directives. Every few years, the Uniform Power of Attorney Act is updated. One of the recent updates involves the required HIPAA disclosures. Without continually updating your powers of attorney and advanced healthcare directives, you run the risk of these important legal documents not working when they are needed the most.
Trusts with Outright Distribution to Family Members
Another common mistake we see is an old Revocable Living Trust that has immediate and complete distribution at death to the surviving family members. In many circumstances, we find that leaving assets outright to your children and other heirs leave them exposed to attacks by creditors, lawsuits, divorcing spouses and other predators.
Lack of Medicaid Planning
Perhaps the biggest mistake we see is a failure to update an estate plan when planning for long-term healthcare. The reality is that people are living longer these days and the possibility of spending our final days in a nursing home, assisted living center or some type of in-home care assistance is becoming a much more likely scenario. Without proper planning, a person runs the risk of spending all their assets on long-term healthcare costs in just a few years.
Improper Planning with Your IRA or 401(k)
Another common mistake is the failure to plan IRA or 401(k) distributions. Many families leave behind a portion of their retirement assets at their death. Under the new SECURE Act, a non-spouse beneficiary must withdraw those benefits out of the retirement account over the course of a 10-year period. This unnecessarily exposes those assets to future creditors, lawsuits, divorcing spouses and other predators. A much better way is to protect those assets with an IRA Inheritance Trust.
For more information
I hope you found this article informative about the five potential mistakes in your parents’ estate plan. If you have questions about you or your parents’ estate planning strategy, please contact our office at (513) 241-0400 or use our contact form to schedule a time to discuss your goals for your family. Our Estate Planning and Probate Attorneys look forward to speaking with you!