Top 10 “Elder Law” Planning Mistakes

1. Failure to Plan – When someone passes away, the decedent’s planning and assets are captured in a “snapshot” that govern asset transfers and other events.  With a proper plan, a person’s funeral, burial, transfer of assets, and post-death protections are executed consistent with their wishes.  Without proper planning, everything is left to chance.  Most times, chance doesn’t work.  Who is hurt? Those closest to the decedent.  What can be lost? Those assets that have been built over a lifetime.

Solution: Plan your estate with an experienced estate planning attorney 

2. Failure to Update the Plan – The plan itself is so important that it ranks one and two on the list of top mistakes.  Think about your life 20 years ago.  Everything has changed.  A plan frozen in time is sometimes as dangerous as no plan.  A 10-year-old that you protected with a “trust”, may now be a 30-year-old that you “trust” to oversee your assets if you are disabled.  Even over shorter periods of time, a change in a family, family situation, or assets – an old plan may not work.  A car needs periodic oil changes to continue running smoothly; an estate plan needs periodic maintenance to be effective when needed.

Solution: Update your estate plan with an experienced estate planning attorney.

3. Failure to Plan for Nursing Home, Long Term Care – The greatest threat to assets built over a lifetime is taxes, right?  Not so – the greatest threat is long-term care costs.  Whether someone is in a nursing home or is receiving in-home care, these expenses can be from $8,000 – $15,000 per month or more.   Take those costs and do the math and you can see the impact on an estate.  Nursing home planning, sometimes referred to as Medicaid Planning, anticipates this potential need and puts the elderly in the best position for their care, but also adjusts the estate to maximize financial protection. When planning for long term care, it’s never too early to get started.  In fact, waiting until you become elderly and/or in need of a nursing home can be too late to preserve those assets. 

Solution: When planning (regardless of age!) ask about nursing home protection. 

4. Beneficiary Designations/Titling of Assets – When constructing an estate plan, a Last Will and Testament is an essential component of the plan.  However, not all property passes through a Will; assets also pass by: (1) beneficiary designation (e.g., life insurance, IRA, 401(k)); or, (2) through joint ownership (e.g., on a deed or bank account).  A beneficiary designation or a joint ownership “trump” a Will, and a Will beneficiary will never receive a jointly-owned or beneficiary-designated asset.  As important as it is to draft a Will, if you fail to understand/review how beneficiary designations and joint ownership alter asset transfers, your estate plan will fail to be fully realized.

Solution:  Review and integrate beneficiary designations and asset titling into your estate planning.

5. Failure to Use an Attorney – Do you: (1) require a doctor for a medical procedure; (2) hire a mechanic to repair your brakes; or (3) engage an electrician to replace an outlet?  Of course, but there are many persons who believe that they can plan their estate without professional help, using a legal website which are so prevalent these days, or (our personal favorite) relying upon something a friend told them.  With a lifetime of assets on the line and your family depending on your good judgment, it is important to use a professional who specializes in this type of work.  

Solution:  Use an attorney that specializes in trust and estate work.

6. Protecting Assets with Irrevocable Trusts – What good is an asset transferred to a beneficiary who promptly loses it or squanders it?  Tax liens, divorcing spouses, lawsuits, and other conniving people conspire to take assets from your beneficiaries.  Tools are available to protect your beneficiaries and their inheritance.  Because asset protection trusts are irrevocable trusts, they cannot be amended or altered once you have passed away.  If you think that such protections may be too expensive, calculate the loss of half of your assets in a child’s divorce.  You will usually see the return on investment immediately.  Asset protection trusts are incredibly flexible instruments whose designs are limited only by your imagination.

Solution:  Consider asset protection options for your planning.

7. Sharing your Plan – Part of the reason that you are planning is in case you are unable to handle your affairs (during your lifetime) or transitioning your estate after your death.  Both situations contemplate that you are not capable of directing your affairs.  Where are your documents?  Where are your assets?  Who are your advisors?  The effectiveness of your agent (power of attorney), Trustee or Executor (trust or Will), depend upon either someone knowing your situation or being able to quickly learn about your situation.  If someone is not in the “know”, it may be a good idea to have a notebook providing directions.

Solution:  It’s your plan, but it requires others to be successful – share your plan.

8. Not Funding your Trust – A revocable trust has many purposes: (1) avoiding probate; (2) a power of attorney substitute; (3) avoiding multiple probates, etc.  None of that works unless the trust is funded.  Funding is the process of taking an asset owned individually and transferring ownership to the trust.  Perfectly drafted trusts with important purposes are useless without funding. 

Solution:  Fund your Trust.

9. Lifetime Gifts – There are different reasons to make gifts during someone’s lifetime.  Of course, this strategy is not available unless you have assets that an individual feels comfortable giving away.  If you are able to gift assets, there are estate planning strategies that benefit you (provide income tax deductions).  Also, in most circumstances, every dollar given way permits you to avoid federal or state inheritance taxes.  Also, clients need to consider giving gifts with a “warm hand” while they are alive to receive the gratitude and thanks from their recipients.

Solution:  If you are able, consider the benefits of lifetime gifts.  

10. Leave a Loving Legacy – Even if you made any (or all) of the mistakes listed above, there is hope!  A child shares a beneficiary designated asset with their other siblings.  Someone decides not to contest a Will.  Children can cooperate with each other to take care of their parent’s health, be transparent, and discuss how best to use their mother’s assets for her care.  A loving legacy, one where children know the importance of family and watch out for each other, can fix estate planning mistakes.  When you ask whether $30,000 is worth it for you to not speak to your siblings again, some answer “yes”, most answer “no”.  Leaving a good family legacy can surmount estate planning mistakes.

Solution:  Focus on family and you have left an invaluable legacy that transcends assets. 

Contact Us: If you have any questions about Elder Law or would like help with an estate plan, contact PA Elder Law Attorney Kenneth C. Russell today or call: 610-565-9010