Estate Planning Mistake #5 – Save-a-Buck Estate Planning

This continues my series of discussions about “The Most Common Estate Planning Mistakes.” Please refer to my previous blog entries for other common estate planning mistakes

In my previous blog entries, I discussed the potential risks of leaving everything to your spouse or your children in your will, and some of the risks of joint ownership for estate planning purposes.

This blog focuses on what happens when people get creative in their quest to save some money on attorney’s fees and costs through do-it-yourself estate planning for their loved ones.

Saving money on certain expenses is certainly an ideal objective. It can be fun (I enjoy doing do-it-yourself projects around the house), it can allow you to have funds available for other ventures (by mowing my own lawn, I save enough each year to pay for an annual vacation), and it can enable you to accumulate funds for the future (your kids’ education and your own retirement).

 

But one needs to understand their own limitations. While I enjoy fixing things around the house, I’m not going to do major electrical or plumbing repairs. I can probably fix it, but are the savings worth the cost of a fire or flood if I do it incorrectly?

I have a pressure washer, and know how to use it. So I can pressure wash the driveway without too many negative consequences. But for me to pressure wash the roof to save some money simply isn’t worth the risk of injury (or worse) if I slip off the roof, not to mention surviving the wrath of my lovely bride if I even suggest I’m thinking of doing such a foolhardy thing.

Similarly, saving a few bucks (ok, a few hundred, if not a few thousand in some cases) can be ill-advised if one doesn’t understand the unanticipated consequences of what they are doing.

Previous blogs have discussed the mistakes that naming your spouse as co-owner of everything, naming your kids as beneficiaries, and adding your kids’ names to property you already own. All of these techniques can achieve the goals one is trying to accomplish, but only after one understands the legal, tax, and other ramifications of what they are doing.

“I’m leaving everything to my brother.  He’ll do what’s right for my kids!”

In order to save money on probate expenses, I have had clients tell me they are placing assets into the name of someone they believe they can trust to “do the right thing” or “will know what to do” to take care of their loved ones. They will often name a relative or friend on a bank account, or as a beneficiary in their will, retirement plan, or insurance policy, and trust that the person they named will do what the client wanted done with the asset. Hopefully, that person will honor your wishes. And if this is someone you fully trust, he or she probably will do what you wanted.

But what happens if that person dies? Unless there is a clear, traceable path of where the money came from, and something in writing directing what is to be done with the money, the money will probably be added to the probate estate of the person you trusted, and the money will go to their heirs, not yours. Perhaps you’ll be lucky, and their heirs will know about and will honor the arrangements you made about taking care of your loved ones. And perhaps you’ll win this week’s mega-lotto jackpot, too.

What happens if that person files bankruptcy, goes through a divorce, gets in an argument with your loved ones, or simply decides to keep the asset as his or her own. What then? If properly documented, you might have been able to prove that the money was actually yours, and it was supposed to go to your loved ones. But since you are no longer around to prove the arrangement you had made, it is doubtful whether your loved ones will be able to prove that the money should belong to them. Your loved ones may lose out on what you wanted them to receive.

Through a Will or Trust, or through other planning techniques, you can still avoid probate, protect your loved ones, and make sure your hard-earned assets get to the ones you intended to receive them.

The Do-It-Yourself Will

Will “kits” are available everywhere. I’ve seen them at office-supply stores, they are advertised online, and I have even received a Will-drafting program as a free “perk” with the tax-preparation software I have purchased.

The good: They are inexpensive, if not free.

The bad: While they may ask you some questions to help you fill-in some blanks, these do-it-yourself kits don’t ask all of the deeper “what-if” questions I’ve discussed in previous blogs. They don’t discuss the need for other documents, such as a durable power of attorney, health care surrogate designation, living will, and pre-need guardian designations. Or if they do, those additional documents are usually available at an additional fee.

They don’t help you determine whether or not you would be better off using a revocable living trust to help protect your loved ones, and often help you save significantly more money than the cost of attorney’s fees in drafting the more comprehensive documents by helping to avoid the expense, delays, and hassle of probate.

The ugly: And if you do it wrong, if you don’t cover alternative contingencies in whom you are naming as your personal representative and to whom you are leaving your assets, or if you make a mistake in how the document is signed and witnessed, your do-it-yourself Will can leave your loved ones in a worse situation than had you done nothing at all.

Hiding Places

For those clients who like to hollow-out books, bury boxes in their back yards, or use other creative places for hiding cash, jewelry, and other valuables with the anticipating that your loved ones will find them and thereby “get-away” with not having to report the assets to the probate court, internal revenue service, or other relatives, keep in mind that things get lost, hiding places are often forgotten, and the wrong people can find them. Just think of how many news stories there have been about treasures being discovered on the grounds of an old home, or valuables that have been accidentally donated to charities because they were hidden in an old desk, etc.

I once talked to the heirs of a retired school teacher who had been living on a pension for over 20 years. They told me, “She has nothing, except for all of her books. We’ve already called the Salvation Army to come pick them up.” On my advice, we decided to search the apartment for hiding places, and found a $50.00 bill tucked into page 77 of every single book in the apartment. There were over 200 books in the apartment. You do the math. Sorry, Salvation Army. My clients got the cash, but you can still have the books.

Summary

Do-it-yourself estate planning which focuses on a single aspect of your goals (e.g. avoiding probate), without considering what else can go wrong due to your actions, can result in unintended and expensive consequences to you and your loved ones.

As I emphasize in most of my blog postings, forms of ownership, beneficiary designations, and other estate-planning considerations have many potential land mines that can negatively impact what you are trying to accomplish. Your attorney will discuss many “what-if” scenarios with you to make sure you have fully understand what could potentially go wrong with your plan, and how to protect your loved ones from what might go wrong.

I will discuss additional common estate planning mistakes, and several methods of avoiding probate in future blogs.

Previous blogs regarding estate planning mistakes:

Mistake Number 1 – Dying Intestate.

Mistake Number 2 – Having an “I Love You, Honey” Will

Mistake Number 3 – Leaving Property Outright to your Children

Mistake Number 4 – Owning Property Jointly

——————————-

Jerrold E. Slutzky, J.D., CFP® is a Florida-licensed attorney at law with offices in Safety Harbor, Florida and Land O’ Lakes, Florida, serving Pasco, Pinellas, and Hillsborough Counties.   His practice focuses primarily on Estate Planning Services (wills, trusts, powers of attorney, health care directives, living wills, asset protection, etc.), Probate, and Business Law Services to small business owners (buy/sell agreements, start-ups, choice & formation of business entity, business succession planning, drafting/negotiating/review of documents, confidentiality agreements, corporations, LLCs, partnerships, etc.) and General Legal Counsel & Advice.

 

The Slutzky Law Firm has two office locations:

853 Main Street, Suite A, Safety Harbor, Florida 34695 (Pinellas County) Phone: (727) 475-6200; and

20719 Sterlington Drive, Suite 103, Land O’ Lakes, FL 34638 (Pasco County) Phone: (813) 909-1515.

Email: JSlutzky@SlutzkyLawFirm.com

Website is www.SlutzkyLawFirm.com

This blog website: http://estateplanningattorneyclearwater.com/

Other Links:

Better Business Bureau: http://www.bbb.org/west-florida/business-reviews/attorneys/slutzky-law-firm-in-land-o-lakes-fl-90209393

Google Maps: https://www.google.com/maps/place/Slutzky+Law+Firm/@27.991074,-82.6982137,17z/data=!3m1!4b1!4m2!3m1!1s0x88c2ee60dbc3b159:0xf4a0732499020872

Facebook: https://www.facebook.com/SlutzkyLawFirm

LinkedIn: https://www.linkedin.com/pub/jerrold-e-slutzky-j-d-cfp%C2%AE/80/b43/24b

Lawyers.com: https://www.lawyers.com/pinellas/florida/jerrold-e-slutzky-j-d-cfp-168091930-f/

Avvo: http://www.avvo.com/attorneys/34638-fl-jerrold-slutzky-4138449.html

This entry was posted in Uncategorized. Bookmark the permalink.