As an estate planning attorney, I see a lot of clients who try to take matters into their own hands to save money, time or both. I also see the unfortunate estate planning missteps and the results, including the time, cost and effort required to correct the mistakes that could have been easily avoided by seeking legal advice from an experienced lawyer. Here are a few things to avoid on your way to an appointment with a qualified estate planning attorney to discuss your own estate plan, and a couple of others to keep in mind once you get there.
- Naming Minors as Beneficiaries. Beneficiary designations are a convenient way to avoid probate and make sure an asset is paid directly to your chosen beneficiary at death. You can name a beneficiary on your life insurance policy or retirement account. Many states (including Massachusetts) now permit you to designate a beneficiary on your bank account or investment account. Many well-meaning parents and grandparents designate their children or grandchildren as beneficiaries of any or all of these types of assets. However, a minor (under the age of 18 in Massachusetts) is not legally able to own an asset. This means that the financial institution involved (the bank, insurance company, or IRA custodian) will not simply name the minor child or grandchild as the new owner of the account following the original account owner’s death. And this is where the fun begins. A conservator must be appointed by the Court to receive the asset on behalf of the minor child, and must hold that asset for the minor’s benefit until he or she is 18. The conservator will need to file annual accountings with the Court reflecting the activity in the account, and how any funds in the account were used for the minor’s benefit, until age 18. The time, effort and expense involved in this process is significant, and unnecessary. In addition, an 18-year-old should probably not have control of significant assets anyway. Leaving your assets to a trust for the benefit of minors or young adults, rather than naming them directly as beneficiary, is usually the better solution, and an attorney who prepares wills and trusts can help guide in preparing a trust appropriate for your situation.
- Drafting Your Own Will. Some people are disappointed to learn that the days of the $100 Will are behind us. In an attempt to save the legal fees required for an experienced estate planner to draft a Will for them, those same people take to the Internet and draft the document themselves. I have seen many of these home-grown Wills over the years, most with the same issues – ambiguous and/or conflicting provisions, an absence of administrative provisions specific to Massachusetts law that will allow the administration of the estate to go smoothly and cost-efficiently, and improperly executed documents. When it comes time to probate one of these Wills after death, all of the money saved up front and more is spent on legal fees trying to resolve the ambiguities and deal with the Court on administrative matters that could have been avoided with proper administrative provisions in the document. I have also seen situations where the so-called “Will” is found to be invalid. For these reasons, doing a Will yourself can be risky business, and is best done by an attorney experienced in Will drafting.
- Adding Joint Owners to Bank Accounts Without Due Consideration of the Consequences. Adding a child’s name to your bank account is a way to give your child convenient access to the account. The child can run to the bank and get cash for you, sign checks if you are in the hospital, or have ready access to the account to pay post-death expenses. I am not opposed to this arrangement for small accounts where convenience really is the objective. However, keep in mind that your child is considered the owner of any account on which his or her name appears. If that child is sued, gets divorced, files for bankruptcy, or encounters other liabilities, that account is considered the child’s asset, and could be reached and the funds taken by a child’s creditor. Joint ownership of accounts can also become an issue after death if your Will does not clearly state what your intention is regarding that account – do you want the funds remaining in the account to belong to the child, or do you want those funds divided equally between all of your children? These are important legacy planning questions that an attorney can help you answer. If your wishes are unclear, the bad feelings and disagreements that result are magnified by the size of the account. All of these issues can be resolved with thoughtful estate planning that includes a power of attorney and/or trust planning, which will allow access to your account by others when needed and division of the account after death consistent with your wishes.
- Failing to Fund Your Trust. If you have a trust, don’t forget to fund it. Funding your trust means changing the ownership of assets so that those assets are owned by your trust or designate the trust as beneficiary. When your trust is properly funded, the assets funding the trust will avoid a probate proceeding at your death. If your trust includes estate tax planning provisions, the assets will be sheltered from estate tax at death. Funding a trust is something that must be done before you die. Once you are no longer with us, the benefits of funding the trust are lost, and probate and taxes cannot be avoided. This is not to say that you should fund your trust willy nilly with any and all assets. The estate planning attorney who drafted your trust for you should provide you with written trust funding instructions consistent with the goals of your estate plan. Make sure you follow those instructions. If it has been a while since your trust funding was reviewed, and you have acquired additional assets or your goals have changed, sit down with your estate planning attorney again, review your trust funding, and confirm the instructions before proceeding to fund that trust!
- Choosing Co-Fiduciaries Unwisely. Despite every parent’s hope that their children are life-long friends, some siblings just don’t get along. As a parent, it is important to recognize your children’s strengths and weaknesses, and be realistic about their relationship with each other and their ability to work together when deciding who will make financial decisions for you under your Power of Attorney, health care decisions for you under your Health Care Proxy, and who will settle your estate as Executor of your Will or Trustee of your Trust. These positions are important jobs that will impact you during your lifetime, and impact people you care about after your death. If you name two people who don’t get along or trust each other a job to do together, things will take longer and cost more than they should as the two parties check up on each other, question every action taken by the other, and delay dealing with what needs to be done because the process is so painful. Do yourself and your family a favor and choose your fiduciaries wisely. Don’t worry about birth order or bruised egos. Choose the person or persons you know will do the job well and treat everyone fairly.
Keep these things in mind when thinking about your own estate plan, and hopefully implementing it with the advice and assistance of an experienced estate planning attorney, who can help you avoid these estate planning don’ts.
Maria Baler, Esq. is an estate planning and elder law attorney and partner at Samuel, Sayward & Baler LLC, a law firm based in Dedham. She is also a former director of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA), and currently serves on the Board of Directors of the Massachusetts Forum of Estate Planning Attorneys. For more information, visit www.ssbllc.com or call (781) 461-1020. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney.
© 2019 Samuel, Sayward & Baler LLC