As promised in my last article, over the next several weeks I will provide a glimpse into my Special Report, The 10 Most Common Estate Planning Mistakes and How to Avoid Them.
In this segment I will unveil the first mistake and a few solutions. To order the complete report click here.
Failure to have any plan at all, or having an antiquated or improper plan.
Heir to the throne.
Those four words have announced who was next in line to receive the wealth of kings, queens and everyday people for thousands of years. Those four words have also brought along with them all the drama, blessings and blunders the benefactors created with their level of transfer planning, also known as estate planning.
Wars, celebrations, assassinations, ceremonies, heartache, joy, hatred, love, millions, pennies, litigation, peace are just some of the results beneficiaries have encountered through the millennia depending on prior planning.
Perhaps the greatest estate planning blunder in recent years will be that created by Prince Rogers Nelson, better known as “Prince.”
It has been estimated that the former music legend’s estate will top $500 million and with no transfer plan in place, the first two beneficiaries of his massive fortune will be the federal government, confiscating 40% and then the state of Minnesota that is entitled to 16%.
“Prince didn’t think he would die. He couldn’t face it.” According to his former attorney, Londell McMillan who never drafted a simple will for the eccentric rock icon.
In retrospect, had Prince faced reality and accepted his mortality, with a little forethought he could have set up an estate plan with trusts to benefit any relatives and charities he chose, leaving only a small pittance to the government, not half.
While the lack of an estate plan of the rich and famous make for great headlines, of greater concern is the plight of regular people. According to a 2014 Rocket Lawyer survey, an alarming 64% of Americans do not have a will, and sadly only 20% have a revocable living trust.
This is a travesty.
At a time when we want the best of feelings to exist, when we want them to find comfort in each others’ arms, family members, out of selfishness, can foster the worst traits in the spectrum of human emotions.
Anger, envy, jealousy – even hate – can be found when confusion is wrought because of a failure to preplan the distribution of even the most modest estate. Sins of omission are still sins.
Antiquated plans are just as problematic. A will drawn up 10 years ago is unlikely to reflect your current situation. Think of how much happens during that time. In fact, I have seen more problems resulting from outdated wills than any other situation.
New marriages, new domiciles, new tax laws, growth, more children and grandchildren, retirement income, new investments; the reasons to update your plan are endless.
Anyone who has a will or a revocable living trust that hasn’t been reviewed since the passage of the Taxpayer’s Relief Act of 2012 is asking for serious trouble. At a minimum, all estate planning documents should be reviewed every five years.
Improper plans also create problems, such as do-it-yourself kits that are never completely finished, non-funded revocable living trusts and/or multiple conflicting wills. All you accomplish with an improper plan is to create confusion, making life difficult down the road for your heirs thus encouraging disputes.
The way to rectify these problems is to follow Nike’s advice: “Just do it!” But do what? Where do you start? The first step with any foreign subject and new adventure is to gain an education. You shouldn’t walk into an estate planning attorney’s office and say,” OK, I’m ready, plan my estate for me.” Not only would that be a pricey mistake, you will end up with a plan that’s not really yours.
Where do you get an education? You’ve already taken a major step in the right direction by reading this article. The Special Report written exclusively for Weiss Education Services, The 10 Most Common Estate Planning Mistakes and How to Avoid Them are written to help the layperson make sense out of estate planning strategies.
Seminars are also a great source of ideas. But take heed: Many seminars are given by estate planning hacks whose sole objective is to sell you a highly loaded annuity or a “one-size-fits-all” Revocable Living Trust.
Make certain that the “expert” is indeed an “expert” and that an estate planning attorney with credentials is part of the planning process.
One of my goals in writing the Special Report, The 10 Most Common Estate Planning Mistakes and How to Avoid Them, was to educate as many Americans as I can to the perils of failing to plan. Another objective was to give hope. We can do it. In fact a proper estate plan takes as much time as it does to plan your next vacation.
Contrary to what the ancient Egyptians believed, we can’t take “it” with us. It is our responsibility to determine who gets what, how they get it and when they get it. To leave that decision up to probate courts isn’t being a good steward. It creates havoc not peace.
One of my favorite series on TV is The Antique Roadshow. I guess I like it because as a kid I was enthralled with treasure hunting. I love it when the conversation goes something like this:
“My grandmother gave this to me in her will before she passed. We’ve had it down in the basement for years.”
“Do you know what it is worth?”
“Not a clue.”
“Well at auction you could easily get $40,000!”
Tears of joy and amazement follow. That sequence is so much better than: “She wanted me to have it!” “No she wanted me to have it!”
Just Do It! Properly plan your estate. If you don’t, the IRS and courts will do it for you and I guarantee you it won’t be in your best interest or your family’s. You have the power now to decide what kind of legacy you want to leave your heirs. Take control by being proactive and implementing your wishes – not the government’s.
Until next time,
David T. Phillips is CEO of Phillips Financial Services and founder and CEO of Estate Planning Specialists. Mr. Phillips is a nationally recognized consumer advocate for insurance, annuities and estate planning with over 42 years of experience. He is the author of bestselling books and has been a featured on national television including: CNN, Fox News, CNBC, Money Talks, and Bloomberg.