Estate Planning Tips:
By Max ValaVanis, CFP®
Estate Planning is a valuable opportunity to designate who you want to inherit your assets after you pass away. Unfortunately, the results are not always what you intend. To effectively pass property to your heirs, you must be diligent in creating your estate planning documents. As I like to say, estate planning is a process, not an event. The following are a few mishaps you can easily avoid.
The most common shortcoming of an estate plan is forgetting to update or name beneficiaries. Far too often, I have encountered clients who lack a valid beneficiary in their IRAs, annuities, brokerage accounts, or their life insurance policies. This is the number one estate planning mistake I see with our 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 who recently passed away. In these cases, the beneficiaries are not organized properly, or the beneficiary percentages may be outdated.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 firstborn, named Cooper. By the time he suddenly passed away in 2014, he and his longtime companion, Marianne O’Donnell, had given 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 sole primary beneficiary with Cooper as the contingent. If Ms. O’Donnell passed before Mr. Hoffman, then his two youngest children would not be in his estate. There would be a long and tedious probate process to reallocate his assets proportionately between the three children. It is always paramount to carefully consider who you would like for your beneficiaries and review them whenever an important event occurs.
Furthermore, one should avoid probate whenever it is legally possible and reasonable. Creating a will can deliver your assets to your desired heirs, but the process of doing so may be cumbersome. Typically, probate proceedings last several months; and in the meantime, numerous expenses are paid. According to trustandwill.com, the average probate process drains three to seven percent of the estate through costs and fees. To make matters worse, it is an open court proceeding; 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, or 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 the 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 beneficiaries for most of the assets you own.
Most seniors procrastinate planning their estate, but it is vital to have a comprehensive plan. If you are unsure about the steps involved in your family’s estate planning, our office is available to help. Please call 321-956-7072 to schedule a private, no-obligation appointment.
Securities offered through J.W. Cole Financial, Inc. (JWC) Member FINRA/SIPC. Advisory services offered through J.W. Cole Advisors, Inc. (JWCA). ValaVanis Financial and JWC/JWCA are unaffiliated entities.