Giving money to an individual during life, but not changing their will. Cash gifts in a will are common. However, the will often isn’t changed. When the will gets probated, the individual named still gets the gift (or an additional gift). No one—including the probate court knows the gift was satisfied during life. As a result, a person may get double.
Not enough assets to fund their trust. If you created a trust years ago, and your overall assets have decreased in value, you should be certain there are sufficient assets going into your trust to pay all the gifts. Some people create elaborate estate plans to give cash gifts to friends and family and create trusts for others. However, if you don’t have enough money in your trust to pay for all of these gifts, some people will get short changed, or get nothing at all.
Assuming all assets pass under the will. Some people think they have enough money to satisfy all the gifts in their will because they total up all their assets and arrive at a large enough amount. However, not all the assets will come into the will. Probate assets pass from the deceased person’s name to their estate and get distributed according to the will. However, non-probate assets pass outside the will to someone else, often by beneficiary designation or joint ownership. Understand the difference so you know how much money will actually be in the estate to be distributed in accordance with the will. Don’t forget to deduct debts, expenses and taxes.
Adding a joint owner. If you want someone to have an asset when you die, like real estate, you can add them as a joint owner. However, if your will is dependent on that asset coming into your estate to pay other people (or to pay debts, expenses or taxes), there could be an issue after you die. Adding joint owners often leads to will contests and prolonged court battles. Talk to an experienced estate planning attorney.
Changing beneficiary designations. Changing your beneficiary on a life insurance policy could present another issue. The policy may have been payable to your trust to pay bequests, shelter monies from estate taxes, or pay estate taxes. If it is paid to someone else, your planning could be down the drain. Likewise, if you have a retirement account that was supposed to be payable to an individual and you change the beneficiary to your trust, there could be adverse income tax consequences.
Talk to your estate planning attorney and review your estate plan, your assets and your beneficiary designations. Don’t make these common mistakes!
To learn more about estate planning in the East Valley, Gilbert, Mesa and Queen Creek, schedule your free consultation with Attorney Jake Carlson by using one of the links above.
Reference: Forbes (Oct. 26, 2021) “5 Ways People Mess Up Their Estate Plan”