Avoid These 3 Basic Estate Planning Mistakes to Protect Your Loved Ones

What will happen if I die without a will in place?

The death of a loved one will cause tremendous sadness and emotional upheaval. The last thing any of us want is for our family to incur additional hardships after our death due to a lack of effective estate planning. After you die, your assets will be divided between your heirs in accordance with the terms or your will or as dictated by state law. The process of transferring your assets and completing your affairs is known as probate, and it can be both time consuming and expensive. Certain factors can add to the cost and time of probate. Our Irvine estate planning attorneys discuss three mistakes to avoid to ease probate for your loved ones.

Mistake #1: Not Having a Will

At least half of all adults across the United State do not have a will. Many others have a will that is not up-to-date or was written in a different state than the one in which they currently live. If you die without a will, your assets will need to be passed through the laws of intestacy. State law will dictate who receives what, with most states first turning to your spouse and children to distribute assets. If you are unmarried and have no children, your assets might go to a parent or sibling, depending on your family composition and state law. Forcing the court to distribute your assets will greatly increase both the time and expense associated with probate.

Those who have an out-of-date will or one made in another state will similarly cause probate delays. The court will need to determine whether your will meets state requirements or whether your wishes are the same despite a major life change after the creation of the will. This leads to time and expense for all involved.

Mistake #2: Failing to Take Steps to Keep Assets Out of Probate

There are many steps you can take to allow larger assets to pass to your heirs without the need for probate. Setting up your estate so that as many assets as possible transfer without the need for probate will save time and expense. Consider using Transfer on Death forms for your brokerage accounts and Paid on Death forms for your bank accounts. Be sure that your beneficiary designations on your life insurance and retirement accounts are completed and up-to-date.

A living trust will allow all assets within it to transfer without probate. Consider creating a living trust and transferring your home and other major assets under its ownership so that these items avoid probate.

Mistake #3: Foregoing an Estate Plan Because You Will Not Pay Estate Taxes

The increase in the estate tax limit has many Americans believing that they have no need for an estate plan because they will be exempt from federal estate taxes. Most Americans do not have assets in excess of $11.58 million, so most of us will not pay federal estate taxes. However, estate taxes are just a small part of the expense of the estate. Your estate will still need to pay probate costs regardless of your estate tax status, and you may be subject to state estate taxation.