Common California Estate Planning Mistakes

1. Naming an Estate the Beneficiary of an IRA, 401K and Retirement Plans

One of the more common estate planning mistakes people make is to name an estate the beneficiary of a retirement account. When a retirement plan is named the beneficiary of a trust, this creates unnecessary roadblocks for your loved ones in accessing the retirement funds. If an estate is the designated beneficiary, the accounts may be subject to estate taxes and possible probate fees.

If beneficiaries are minors however, naming a Trust as beneficiary may be helpful. Some attorneys might recommend you set up a special trust and name the IRA as beneficiary. Often trust settlors simply mirror the named beneficiaries listed in their trust which works just as easily if the beneficiaries are all adults.

2. Designating an Estate as the Beneficiary of a Life Insurance Policy

You may not want to designate your estate as the beneficiary of your life insurance policy. In most cases, as with retirement accounts, it is better to name your beneficiaries individually on life insurance policies and not name the trust as beneficiary. Trusts are not considered people. As a result, life insurance proceeds that are paid to trusts might be subjected to estate tax.  As mentioned above, if all beneficiaries are adults, you can simply name them as direct beneficiaries and avoid these other headaches for your loved ones when attempting to get access to the insurance funds.

3. Leaving Money to a Teenager

When you appoint a teenager as the beneficiary to your estate, you pretty much write them a blank check. It’s best practice to allocate sums of money towards their education and living expenses through college. Subtrusts can be established with an assigned trustee appointed to monitor and distribute the monies. Your trust can set up benchmarks in which your Trustee will allocate and distribute sums of money to young family members. Gifting minors with large sums of money without oversight is one of the most common estate planning mistakes parents make.

4. Not Telling Family Members How to Access a Safe Deposit Box

There is no point in leaving all your estate planning documents in a hidden place. This may result in needless time and money spent on trying to find the box. Tell a few of your closest loved ones how to get access to your safe deposit box and make sure they are named as having access to the box.

5. Not Fully Funding a Trust

Included on the list of common estate planning mistakes is when a person or couple leaves their trust unfunded or assets out of their trust.  The whole point of creating a trust is to help your loved ones avoid the headache of having the courts decide how your assets are to be distributed. Make sure all your assets are transferred into your trust account.

6. Not Having an Estate Plan

If you do not have an estate plan get one! This made number 6 on our list of most common estate planning mistakes. Death and taxes are certain in life. With that in mind, avoid paying even more estate taxes upon your death. People that die without proper estate planning in place leave a mess for their loved ones to deal with.  Execute an estate plan that will simplify the process of distributing your estate after your death. This is one of the best things you can do for your family.

Contact A People’s Choice and Avoid Common Estate Planning Mistakes

Contact A People’s Choice for more information on how to avoid common estate planning mistakes. We can help you draft a trust to avoid probate altogether. Call us at 800-747-2780.