Last week we took a look at several common DIY estate planning mistakes that can end up costing you and your family a lot of money. This week we are going to continue our look at DIY estate planning pitfalls. Whenever you use a do-it-yourself guide, premade form, or rely on advice not given from an experienced attorney, you run the risk of not only developing a plan that has problems, but also, not realizing that those problems exist until it’s too late. As you go about the planning process, keep these DIY mistakes in mind the help guide you in creating an appropriate plan.
DIY Mistake 4. Failing to take out-of-state property into account.
If you own real estate in more than one state, you must look closely at those assets when you develop your estate plan. For example, if you own a home in North Dakota and property in Minnesota, you will have to prepare for two different probate processes. Every state has its own probate laws that apply to property located within its borders. Should you own property in multiple states, you effectively have to go through multiple probate cases. This is known as ancillary probate. Failing to prepare for the extra set of requirements, time frames, and rules can be a serious mistake.
DIY Mistake 5. Failing to fund your trust.
If you have created a revocable living trust, it is absolutely essential that you take the time to ensure that you fund your trust properly. A living trust that is not properly funded is effectively worthless. Funding is the process in which you take the property you own as an individual and transfer it into the trust’s name as the new owner. Once the trust owns that property, it can and then distribute it after you die without the necessity of going through probate.
Unfortunately, if you make a mistake during the funding process, or forget to properly transfer some of your property, that property will have to go through probate.
DIY Mistake 6. Failing to review your plan on a regular basis.
Estate planning can seem like a burden. Some people who go through the process and create a comprehensive plan are relieved when the process is over. While this is a natural feeling, you shouldn’t allow that sense of relief to trick you into believing that your job is over.
A good estate plan is one that you review regularly, and update as necessary. As your life changes, as the laws change, and as the tax code changes, you will need to be prepared to make changes to your plan in order to get the most benefit.