How Forbes Got “Major Errors in Estate Planning” Wrong

F Forbes recently shared its list of 7 Major Errors in Estate Planning. I’d like to share them, one at a time, with comments, and then add a couple they missed. Rather than swamp you with a treatise, here’s one that I really feel passionate about.

There are so many easy ways to screw up your estate plan – which can damage family relationships for life in many cases – and so few ways to make sure it’s right. I’ll share how our clients get peace of mind that their plan’s going to provide what they need and bring their family closer, not the opposite.

Not Having a Plan

In a sense, everyone does have an estate plan: state law makes this point a certainty. It simply may not be the plan that you had in mind, or that your family would have preferred.

Every state has laws of “intestacy.” Intestacy is the word for dying without a will. The laws of intestacy don’t control assets that have beneficiary designations (unless those beneficiaries have also died) so this “plan without a plan” can result in very unfair and unequal divisions of assets.

One major pitfall to be aware of in Colorado’s laws of intestacy is the treatment of the surviving spouse. Your surviving spouse will NOT inherit everything you have built together. The half that is deemed to be yours will be divided between your spouse and your next of kin.

Watch out, because this will affect you too if your spouse is the one who dies first. You don’t want to have to sell your home to pay out to your spouses’s next of kin!

Another major downside to not having a plan is that you have no provisions for how to care for you if you become incapacitated. In Colorado, that means two important things: one, your loved ones are going to have to spend a bunch of money and time begging a judge for permission to care for you and two, you are going to be kept alive, even as a hopeless vegetable with no quality of life for as long as technologically possible (and that can be a long time!).

How Forbes Got It Wrong: “It simply may not be the plan that you had in mind, or that your family would have preferred.”

I guarantee that it will not be the plan you had in mind, or that your family would have preferred. Let me list just a short sampling of the things people discover about failure-to-plan plans that they usually do not like:

~80% of people become incapacitated during their lives for some period of time.

Court Hearing

If you have no plan, all of your financials and medical information becomes part of the court (i.e. public) record so that someone (not of your choosing) can get the court’s approval to make medical and personal decisions for you (and get paid for it out of your money).

~Likewise, when you die, every single thing you own is itemized for the public record along with who is getting it, how old they are and where they live. It makes for very convenient sales target list-making for the honorable and just target list-making for the dishonorable con men and women who are known to work the probate lists.

~The amount that you can pass on free of estate tax has changed every year since 2001.

Forty percent

Yes, we have a $5M exemption now. But Obama has proposed a $3.5M exemption and what’s to stop the next proposal from returning to $1M or even $600,000? (That would mean that anything you own after the first $600,000 would be taxed at the rate of (probably) 40% due within 9 months of death.)

It’s all so avoidable!

What makes the idea of getting your estate plan done so scary for you? Take just two minutes right now and come up with three obstacles to getting your estate plan done. Then come up with the three best reasons to get it done. I’ll bet if you compare the two, the obstacles are *nothing* compared to the reasons to do it.

You know that Bennett Braverman and I are experienced in all sorts of fascinating family and asset arrangements and we can probably help you with yours too.

Best Regards, Diedre Braverman

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