6 Estate Planning Mistakes to Fix Now


When estate planning is done wrong, it can create havoc on heirs after a family member passes. Estate Planning is not a fun topic to discuss, but it is an essential part of financial planning. The only way to keep your plan in good condition is to review it regularly yourself and every five years by an attorney. Brianna Bocian, the owner of and estate planning attorney at the Law Offices of Brianna Bocian in San Diego is helping us review some costly estate planning mistakes.

1. Not having a plan in place.

The biggest mistake we see is not having a plan at all. We hear most often that people think they do not need a plan. If you have any of these; children, a house, money in a brokerage account worth more than $150,000 (in California), or you desire to have specific items go to particular people, you are in need of a plan. "Not having a plan in place could lead to probate and will most likely create confusion and a burden on the surviving family members. Probate is costly, a matter of public record and can take up to a year and a half to complete. Having an estate plan in place will bring peace of mind to you and your family." - Brianna Bocian. At the minimum, we recommend you have a Will, Advanced Health Care Directive, and Durable Power of Attorney created.

2. Not making a thorough decision on a child's guardian.

Choosing a guardian for your children is probably the hardest decision to be made when creating an estate plan. You need to consider many things, but don't forget to think about, will the potential guardian have the required financial means, is their life stable, and will they be around to see your kids through age 18? Often the first thought is to name your parent/s as guardian, but this might not be the best idea. It is always good to look for someone your age or younger at least as a second option. Lastly, you need to make sure the person up for the job. Always talk to those you are thinking of naming before you do it and make sure they are comfortable with being appointed to take on this responsibility. Brianna adds that a "Child's guardian is a tricky one because even if you pick someone, the court looks at what is in the best interest of the child. So...be mindful of that." Even if the court reviews your decision to confirm it is appropriate, it is always best to be able to give your own direction.

3. Not explaining your plan to those involved.

Make sure those with leadership roles in your plan know their duties, so their responsibilities do not blindside them. Make sure they know what they will need and where documents are located. Brianna say's "Not explaining your plan to those involved can create confusion after your death. In addition, explaining your choices and decisions before something happens to you lets your loved ones know what you want and why. In addition, it can help avoid trust administration litigation if everyone understands how your assets will be distributed." See my previous blog post for more information on what to share with those involved in your plan.

4. Not titling assets into your trust.

If you take the time and money needed to create a trust but then decide not to title your assets in the name of the trust, it becomes pointless. Move all assets without beneficiary designations under the name of the trust to make sure they are distributed as per your instructions. Many individuals create "Pourover Will's" for the intent that, if something wasn't named in your trust, the Will grabs that asset and pours it into your trust. This is an excellent type of Will to have, but don't leave all the work up to the Pourover Will. If you don't fund your trust, thinking the Pourover Will can grab all of your leftover assets without probate, you are wrong. If not titled correctly Pourover Will assets over $150,000 can be subject to probate court (CA). Make sure to title your assets in the name of your trust right after it is created. Your Estate Planning attorney will often help you do this.

5. Not changing your beneficiaries.

This mistake is the most common. Custodians do not make naming a beneficiary a requirement to account opening, so you might never have filled this out. If they are currently not blank, they could be in your parent's names, in the name of an underage child (children, under 18, can't take possession of an account), or ex-wife/husband. All of these examples have their own issues. Make sure you regularly check who is named and update them as life changes. You will need to designate a primary and contingent beneficiary. If you have created a trust, you can also name the trust as a beneficiary, and it will be distributed as per the language of the trust. This simplifies the process so as long as your trust is updated, the accounts will be too, but this could not be the best option in some cases. Check with your estate planner on what will be the best option for you and your beneficiaries.

6. Not updating your plan every 5 years.

Brianna notes that "Not updating your plan every 5 years may cause problems for your beneficiaries. There are often changes in the law so you want to make sure your plan isn't affected by new laws. In addition, you may have asset changes not reflected in your documents, and you may want to change your beneficiaries." You may also need to rename individuals of power over time. Sometimes the people you have named in leadership roles can become estranged from you, get divorced from you, or become deceased. In any of these cases, you need to update your documents immediately. Life changes also need to be documented, such as having a new child. When big changes happen, it is a great opportunity to update and review your plan.

Estate planning is a living document, and the only way to keep up the changes is to make a note on your calendar to review it regularly. We review these pertinent areas with all of our PWR financial planning clients. Get in the habit of making sure your plans are still in line with your current intent.

*This article contains general advice and advice specific to California residents. We are not attorneys and are not giving legal advice. Always review your plans with your estate planning attorney.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego, CA. PWR is a virtual firm that is woman-owned and serves busy families and impact investors. Planning Within Reach, LLC and their advisors never receive any type of commissions for sales and does not have any insurance licenses or brokerage relationships.