10 Estate Planning Problems That Could Cost You a Fortune

As Certified Elder Law Attorneys by the National Elder Law Foundation, we see a lot of mistakes that people have made before they come to see us.  Most are correctable.  Some are not.  Here are some areas in which you could save your family some anguish and money.  

Problem #1:  Probate.  Probate is the court-supervised process of passing title and ownership of a deceased person’s property to his or her heirs.  The process consists of assembling assets, giving notice to creditors, paying bills and taxes, and passing title to property when the judge signs the order. Probate can cost your loved ones 3% to 5% of your estate and take years to complete.  Protect your assets from the high cost of probate by setting up and properly funding a living trust.  “Properly funding” means changing title to the assets from your name, individually, to the name of your trust. For example, a money market account owned by Jane Doe, individually, and with no beneficiary designation will be a probate asset subject to the costs and delay of the probate court process. However, if Jane had created a revocable living trust, for example, and transferred title to that money market account from herself to the trust, that account would now avoid probate and pass privately to the beneficiaries named in the trust.  Additional benefits of the trust are discussed below.

Problem #2:  Estate taxes.  Protect your assets from state and federal estate taxes by setting up and funding a tax-saving Family Asset Protection Trust.  Because of recent changes in the Estate and Gift Tax laws, most of us don’t need to worry about estate tax at the federal level. Massachusetts, however, has a much lower exemption amount of $1,000,000. In other words, if you are a Massachusetts resident and you die owning more than $1,000,000 in assets, your estate will owe taxes to the Commonwealth.  Remember that your assets for estate tax purposes include your home, retirement plans and even life insurance death benefit.  However, a proper estate plan will save a tremendous amount of expense for your family and can be designed to reduce, or eliminate, any estate taxes that would be owed at your death.

Problem #3: Bloodline and Divorce Protection Planning.  Protect your assets from the claims of your family’s creditors, ex-spouses, and keep hard-earned assets in your family’s bloodline.  As we meet with families, when the discussion turns to whom they would want as beneficiaries, we often hear, “Well….I love my son-in-law, but….” It’s not uncommon to have great affection for your son or daughter-in-law, but to acknowledge that the current divorce rate is very high or that you simply to protect your assets from that possibility.  Aside from any divorce possibilities, many clients would like their assets to pass from their child to their grandchildren, not to an in-law, who may then re-marry and spend assets on a new significant other.  Your lawyer can include provisions in your trust to help protect any inheritance you leave behind for a beneficiary from the uncertainties of life.

Problem #4:  Inexperienced Beneficiaries.  Protect your assets from being wasted by young or inexperienced family members.  For instance, beneficiaries may be under age 25 or have issues such as drug, alcohol, or gambling addictions.  Most beneficiaries spend their entire inheritances in less than two years, regardless of the size of the estate or the heir’s socio-economic background.  Your lawyer can set up your trust with protective provisions that provide guidance and safeguard your life savings.

Problem #5:  Guardianships.  Protect your assets from the high costs of incapacity by executing a Massachusetts Health Care Proxy, which names a primary and alternate agent who you designate to make medical decisions for you if you become unable to make those decisions for yourself. A thorough health care proxy will list the powers that you give your agent as a way to fully empower them and avoid their needing a Court’s permission to administer certain medications, or to consent to nursing home placement.

Problem #6:  Conservatorships.  Protect your assets from the high costs of incapacity by drawing up a Durable Power of Attorney in which you name someone (and then an alternate) to assist you in making legal and financial decisions when needed.  Very general Durable Powers of Attorney are often not accepted by banks and other financial institutions and can still force an agent to seek Court permission before being able to act on your behalf.  As Certified Elder Law Attorneys, we will discuss with you important and specific provisions which will be helpful in a crisis. 

Problem #7:  Nursing home care.  Protect your property from the high costs of nursing home care which averages over $12,000 per month in Massachusetts.  If appropriate, set up a Medicaid Asset Protection Trust while leaving enough outside of the trust to cover your expenses as you wait out the MassHealth five year look-back period.  Or, it may be appropriate to buy insurance that covers nursing home care and also provides a death benefit that returns the money not spent on nursing home care to your heirs.

Problem #8:  Ineffective estate plans.  Protect your assets from an ineffective or cursory estate plan.  Don’t fall into the trap of depending on pre-printed “cookie cutter” form kits or document preparation services for your estate plan.  Contrary to what you may have heard or read, one size does not fit all!  It is the experienced, specialized guidance that is important.  Some clients believe they have it all covered and are shocked to learn of significant problems in their plan which they never knew or considered.  We see family members left to clean up the mess.  They wish that mom or dad had seen a caring specialist.  As is true with much in life, you tend to get what you pay for.  If you are concerned about any of the problems addressed in this article, you need a comprehensive plan designed specifically for your goals by experienced professionals who have in-depth knowledge of the challenges that you will face and the rules that you will be subject to. Don’t let the temptation of saving a few bucks in the short run cost your family many thousands in the long run.

Problem #9:  Commissioned salespeople.  Don’t depend on financial planners or insurance professionals to plan your estate.  While they may be knowledgeable in their field, they simply don’t have the knowledge, skill, specialization or relevant experience to handle the many legal consequences of your estate plan.  You didn’t hire a surgeon to write your will.  Then why would you hire a financial planner or insurance salesman to plan your estate?  The specialties are just different.   Your estate plan is too important to entrust to anyone other than a skilled, qualified, estate planning and asset protection attorney who is licensed and actually practices law.  When you die and your family members try to settle your estate, that isn’t the time to discover that you hired the wrong person.  Do your family a real favor and prepare properly.  Make sure your estate plan has been correctly and skillfully set up and properly funded.

Problem #10:  Unqualified lawyers.  Just because someone is an attorney, doesn’t mean they have the relevant experience or judgment needed.  Some attorneys have recently started estate planning or dabble in it, because they hear it has become popular with seniors and assume it will be easy.  It is not.  Estate planning is too important and too complex to leave to a newbie or a dabbler.  Please select an experienced, qualified attorney who focuses his law practice on asset protection, estate planning and elder law.  Designations such as CELA, or those on Boston Magazine’s list of Super Lawyers, or are active in the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA), can be helpful in determining if the attorney is dedicated to this field.  Proper homework beforehand can make all the difference in meeting your goals to protect your family, your money and your property.

©Surprenant & Beneski, P.C. 35 Arnold Street, New Bedford, MA 02740, 336 South Street,   Hyannis MA 02601 and 45 Bristol Drive, Easton MA 02375.  This article is for illustration purposes only.  This handout does not constitute legal advice.  There is no attorney/client relationship created with Surprenant & Beneski, P.C. by this article.  DO NOT make decisions based upon information in this handout.  Every family is unique and legal advice can only be given after an individual consultation with an elder law attorney.  Any decisions made without proper legal advice may cause significant legal and financial problems.