Estate Planning Blunders
By Max ValaVanis 321-956-7072
Estate Planning is a beautiful opportunity to designate who you want your assets to go to after you pass. Unfortunately, sometimes the results are not what you intend. At this point, for obvious reasons, it is too late for the decedent to make any changes. Therefore, to effectively pass property to your heirs, you must be diligent in creating your estate planning documents. The following are a few mishaps you could easily avoid.
The most notorious shortcoming of an estate plan is for-getting to update or name beneficiaries. Far too often I have come across a client lacking a valid beneficiary in their IRAs, annuities, brokerage accounts, or even their life insurance. This is the number one estate planning mistake I see with our senior clients. So, what do I mean by “valid beneficiary”? Well, that depends on you! Sometimes a beneficiary will be a previous spouse or a person that recently passed away. In these cases, the beneficiaries are not organized properly, or the bene-ficiary percentages may be outdated.
Take the case of the late actor Philip Seymour Hoffman. When he created his will in 2004, his only child was his first-born named Cooper. By the time he suddenly passed away in 2014, he and his longtime companion, Marianne O’Donnell, gave birth to two additional children. In the ten years that passed since he created his will, Mr. Hoffman never updated his beneficiaries. Thankfully, Ms. O’Donnell was the only primary beneficiary with Cooper as the contingent. If Ms. O’Donnell passed before Mr. Hoffman, then there would be a long and tedious probate process to reallocate his assets pro-portionately between all three of his children. It is always par-amount to carefully consider who you would like to be your beneficiaries and review them whenever an important event occurs.
Furthermore, avoid probate whenever it is legally possible. Creating a will can deliver your assets to your desired heirs, but the process of doing so may be cumbersome. Typically, probate proceedings last 3-6 months, and in the meantime, numerous fees are paid. The average probate process generally drains five to ten percent of the estate through administrative costs and fees. To make matters worse, it is an open court pro-ceeding; and, therefore, the hearing and documents are open to the public. So, what can we do? Personally, I am not a fan of drawn-out proceedings that are expensive and strip people of their privacy.
Thankfully there are three main alternatives to probate. First, you can list a beneficiary on an account like IRAs, bank accounts, and life insurance. With a valid death certificate, these accounts will promptly transfer the ownership to the named beneficiary. There are also titling options that provide survivorship features. For example, a married couple can own their house as Tenants by Entirety, and when one spouse passes away, the sole ownership of the house can swiftly shift to the surviving spouse. A third strategy for avoiding probate is the creation of a trust. A trust is reasonably affordable, can promote anonymity, and can quickly shift assets to your heirs. With a trust, you can designate primary and contingent ben-eficiaries for most of the assets you own. Creating a trust is a fantastic way to organize your estate.
Most seniors procrastinate their estate planning, but it is vital to have a comprehensive plan of asset distribution. If you need guidance in determining the steps needed in your family’s estate planning, feel free to call our office for a no-ob-ligation, private appointment.
Max ValaVanis is a co-owner of Valavanis Financial in downtown Melbourne and in Rockledge. Max specializes in lifetime income planning for Retirees while protecting principal. Max can be reached at 321-956-7072.