Wealthy & Wise Critical Estate Planning Mistake

About the Video:  Wealthy & Wise Critical Estate Planning Mistakes

Critical estate planning mistakes can have serious consequences for you and your loved ones. Failing to create a comprehensive estate plan, not updating your plan regularly, or not designating the right beneficiaries or executors can all lead to unnecessary legal battles, delays, and expenses. Additionally, failing to account for potential tax liabilities or not considering the long-term needs of your heirs can also result in financial difficulties. To avoid these critical mistakes, it is crucial to seek the advice of experienced professionals. At NCH we have the expertise to help you plan the correct way.

Prefer to read? A full transcript is provided below.

Adam:

So welcome to another edition of Wealthy and Wise. I am your host, Adam Kintigh. And today, we want to talk about critical mistakes that people make in their estate planning. And who better to help us uncover these things than Mr. Kurt Harris of the Harris Law Group, a rock star attorney here in Las Vegas. So, Kurt, we were talking earlier about some critical mistakes that people make in estate planning. And, well, the first question is, should they be irrevocable or revocable in your view?

Kurt:

Well, there’s two kinds of way to go about that. But a revocable trust is for everybody. So, in my view, everybody needs a revocable living trust for the very purpose of avoiding probate, if for no other reason. Beyond that, a little more advanced planning or stages of advanced planning might involve an irrevocable. But for the most part, the revocable living trust is the best bet for almost everyone who seeks to avoid probate.

Adam:

And I’m sure that you see a lot of mistakes over the years. People pass and they get sick and they have things are just missing from their living trust. In your view, we’re going to go through the top things that we really feel that people really miss and critical mistakes. What’s your number one critical mistake that you think people make?

Kurt:

You know, it’s kind of interesting you bring that up. I guess one of the critical mistakes that I think is something so often overlooked right off the bat. I’ve gotten several calls this week about trusts that were never signed. I can’t believe people never signed the trust, but they paid for it. They put it together, they drafted it, they got a copy of it, but they never, ever signed it, never executed it. And so that’s just a nice piece of paper that has the intentions of the testator, as it were, but is ineffective with regard to their estate, still needs to go to probate. So, well, number one, make sure you sign it. Okay. That’s your first step. Second, I think you’ve got to have a little forethought on how you want your estate to be distributed. So, you get to set up your contingent beneficiaries and you’ve got to have contingencies. You don’t want to overthink it. You don’t want to get super complicated. You want to make sure that you have it laid out so there’s somebody there to take your estate in the case of other instances that may occur. Someone may pass away. Do I have a backup for that person that passed away? Am I on top of it? Do I have all my contingencies in place?

Adam:

Well, back me up one second. So, I had an attorney years ago I worked with, and he did the estate plan. The lady had no heirs and wanted to leave her millions of dollars to the ASPCA, leaving all to the animals. And so, she left it there, got the trust done. And this attorney kept telling her, hey, I need you to fund the trust, and you put something in it so it’s active. Never did it. Never did it. She passes and lo and behold, who do you think the probate court calls? But this attorney that did the will and he ended up, he made enough money off of that one probate to buy the nicest house on the nicest golf course in Las Vegas and pay cash just from the probate fees.

So that is a really good point you make in making sure it’s done and funded properly. Otherwise, we have problems.

Kurt:

Yeah, the funding part can be a huge issue. In particular, that is another big mistake that we indicate is that you’ve got to make sure you fund it. If you have real property like a home in particular your personal residence, you need to fund the trust with the residence if you can. You want to put it in there so that transfer occurs, and it makes it much easier on your heirs down the road if you do that now. It’s much easier for me to do a quick claim deed of my property into my trust, now, than it is for my heirs to have to go to the probate court and try to get permission to sell the house or permission to transfer the house. And it just takes a lot of effort and it’s very expensive and time consuming and can take up to like nine months sometimes. And a probate process is pretty simple and cost thousands of dollars for something I could have done easily with a quick claim deed. Right now.

Adam:

I agree. Now, one of the things we look at is updating the trust and keeping it updated over the years. In your view, how often should a person really update the trust?

Kurt:

You know, I try to say every two years, two, three years is kind of the basic. A lot of people overlook that. They think it’s kind of like once I’ve done it, I don’t need to look at it again. Or if you have a big life changing event or something occurs. I’ve had a trustee that I named that passed away. I’ve had a child get married. I might want to update that. I’ve had the worst-case scenario, a child that’s passed away or a beneficiary that’s passed away. I get that all the time. Sometimes people say, Well, what if what if? And I think, well, if you are alive at the time and a what if comes up, you need to get in and have your trust reviewed or think about reviewing your trust and make an amendment to it. If you’ve had one of those, what if’s that’s occurred. I know I get a lot of those contingent types of questions from our clients, and I’m thinking to myself the what if is, that’s your key or your reason or your trigger to go and now do something, You need to go now amend your trust and make a change because you’ve had one of these life changing events or something that’s occurred with one of your beneficiaries, one of your trustees, or in your own family, right, with yourself.

Adam:

Now, a kind of a twist in the estate planning is digital assets. So, people have all of the cryptocurrency and fungible tokens and all of these things. How does that fit into the revocable living trust world?

Kurt:

It’s a huge dynamic that’s coming out now and it’s kind of new in the law. I always like to have a little bit of a lecture about the types of property that we have. And we have real estate, which is, I liken it to dirt, and we have also personal property that I liken and the things and stuff. And then we’ve got the digital world, which we haven’t really tackled yet legally, but there are so many digital assets out there and passwords and ways to get in and difficulty that you might have if somebody passes away getting into their account of digital assets, blockchain, all those other types of currencies that may be out there now, Bitcoin and a couple of those other things. These are very significant to people’s estates and you need to have that in place as part of your estate plan if you have digital assets right down to your email, which is really a digital asset if you think about it. I’ve had it for a particular amount of time or I’ve got a website, I’ve got something that has some value and yet I don’t have the password to get into it. And I didn’t leave the password anywhere where somebody could get at it. And if I don’t have some kind of disposition for those digital assets, they can be lost or just caught up in the infrastructure of the Internet whatever that happens to be and never be obtained or accessed by a party without some type of a court order. But even then, it might be very difficult to get at it.

Adam:

Well, so the biggest piece that we have in setting up and getting your estate plan in place I think is procrastination and how many people fail to even start their trust or put their family will together and none of these things get done and think we’re going to live forever. How does procrastination fit into your view of a critical mistake?

Kurt:

It’s huge and there’s a huge percentage of the population that just procrastinates. We have good intentions. We want to do it. It’s the right thing to do. We know we should do it. And as we advance in our lives, we just don’t get to it. At some point you feel like I need to do it, I want to do it, I’ll get to it. And you just never do. And for whatever reason, you just really got it, something you really got to attack and tackle early on to just get at it. Sometimes we recommend maybe you start with a certain document and that might lead to another one. I know at NCH they have the final wishes document, which I think is really great. When you fill that out, you start telling your heirs where everything is at and what I have, and then you do an inventory of your life, essentially of your assets, of all the things that are very important to you. And you start listing those in this final wishes document and then one thing leads to another and pretty soon you realize, I got to do a trust. I got to have a will, I got to have powers of attorney, I got to have these other items in my estate plan to make sure that it’s complete so that I help my heirs to take care of my estate after I’m gone.

Adam:

Well, you’ve talked about over the years some really famous people that have done a terrible job and then some famous people that have done a great job. Who do you think is probably the most famous person that did a terrible job with their estate plan that caused absolute chaos for their family?

Kurt:

I think that maybe as far as a famous person goes, it might be Prince was one of the worst because he just passed away without any estate plan whatsoever, which was too bad. But he was very, quite young. If I have a back up to him, which I think is super, is unfortunate, was Aretha Franklin, who knew that she had a life ending terminal type illness and had a very trusted attorney who was, had drafted the paperwork for her several times. And she just never got around to signing it. She never got around to getting it done and passed away without any estate plan in place for her children. Now, obviously, they’re going to be okay, but they’re just, there’s a huge tax implication and there’s the whole system of having to go through the probate system and paying out to the different attorneys or whoever it might be, which costs the estate funds. And it was really for no reason at all. It was really unfortunate that those are somewhat tragic situations with famous individuals who all they had to do was just have the trust pretty easy trust put in place, or maybe a couple of trusts. It would have taken care of everything or an LLC possibly.

Adam:

And one of the things that we are big proponents of at NCH is doing the trust, but also the pour over will. And can you tell our audience a little bit about the pour over will and how that can help in a life-changing event?

Kurt:

Yeah, a lot of times we, you know, we call those the ancillary documents, the other documents to go along with the trust. The pour over will is one of them. And the pour over will does exactly what it says. It pours over into the trust. So, it names my trust as my sole beneficiary of any assets that I have on the date of my death. And the pour over will doesn’t need to be probated. So, it takes any assets that I have on the date of death and it puts those into the trust so that they don’t have to be probated. So, I don’t have to go through my life trying to inventory every last thing and put it into my trust. My pour over will is kind of this catch all provision that will take everything and put it into the trust after I pass away. So, it’s a great thing to have in place, kind of that safety net. It’s going to make sure that all my assets are transferred to the trust on the date of my death without the need of going through probate.

Adam:

Well, that’s fantastic. Well, there you have it. Those are the critical mistakes people make. Don’t procrastinate. Be proactive. Reach out to NCH, schedule some time. And let’s talk about how we can put your trust in place for your loved ones. Thank you so much. Have a great rest your day!

DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.