When someone passes away in Florida, their estate often has to go through a legal…
It is common for Americans to view estate planning as a one-time task that, once completed, can be filed away until they pass away. However, this approach can create problems. Without being aware of the potential impact, people may make gifts during their lifetime or change listed beneficiaries on accounts. These changes can have enormous unintended consequences on their will or trust.
Reviewing your estate plan regularly can help prevent these common mistakes and ensure your assets are distributed according to your wishes. Working with an experienced estate planning attorney can help you identify issues before they affect your loved ones.
Common Estate Planning Mistakes That Can Affect Your Will or Trust
Some of the most common estate planning mistakes include:
- Giving lifetime gifts without updating your will
- Failing to properly fund a trust
- Assuming all assets pass through your will
- Adding joint owners to accounts or property without considering the consequences
- Changing beneficiary designations without reviewing your overall estate plan
| Estate Planning Mistake | Potential Consequence |
|---|---|
| Lifetime gifts without updating your will | Recipients may receive the same gift twice, creating disputes among beneficiaries. |
| Not reviewing trust assets | There may not be enough assets available to fulfill planned gifts. |
| Assuming all assets pass through your will | Non-probate assets may not be distributed according to your will. |
| Changing beneficiaries without advice | Updates may conflict with your estate planning goals. |
Gifting Money During Your Lifetime Without Changing Your Will
It is a common practice for people to include cash gifts in their will. Whether money is intended for a favorite nephew or niece, childhood friend, or household worker, there can be significant sums of cash for distribution to inheritors listed in your will.
Often, family members learn these gifts were already satisfied during your lifetime because they hear the story about the joy it brings to the recipient. However, failing to update your will after making a lifetime gift can create unintended consequences.
Without modifying your will after gifting cash during your lifetime, the named individual will still get the gift when the will enters probate. Smaller gift amounts may not create issues in an estate but may not match your intentions.
More considerable sums of money can create situations that financially break an estate plan. A court will not know that a gift was satisfied during your lifetime either. Additionally, there may be no one left to explain the intention of the will, resulting in a second gifting of cash.
The cash gift is paid again if the inheritor chooses not to be forthcoming. While many in the family will view a lifetime gift as an advance on an inheritance, disagreements can still occur.
If the recipient does not agree, you may have to litigate, which can be costly. If you give lifetime gifts of cash and do not intend to give a secondary gift upon your death, change your will after the gift.
Too Few Assets to Fund a Trust
If your trust is years old and its overall assets have decreased in value, reviewing the gift provisions outlined in your trust is crucial.
You may not have enough assets to pay for all of the gifts. It is not unusual that, during strong financial times, people create extensive estate plans leaving cash to family and friends and creating trusts for others’ benefit.
However, these good intentions can fall short of reality in leaner times. As a result, some people may receive less than hoped or nothing at all.
How Trust Assets Can Affect Beneficiaries
- Cash gifts within a trust typically pay out first.
- Remaining trust assets may be reduced after these payments.
- Beneficiaries may receive less than originally intended.
- Trust provisions may fail if there are not enough assets available.
For example, if you leave $1,000,000 to your sibling and the rest in trust for your children, but at the time of death, your trust is only worth $1,150,000, the trust will then only contain $150,000 for your children after the payout.
This is probably not your intention. Another possibility is your trust provisions do not get funded because there is no cash to cover them.
Sadly, it will be the lawyer or trustee’s responsibility to advise these recipients of what they were supposed to receive from the trust. However, they may not always be able to fix the issue.
Regular review of your trust and its goals can avoid this situation. Crafting a trust with realistic goals or making amendments during less abundant times will keep the trust’s intentions valid and achievable.
Thinking All Assets Pass Through Your Will
Some people leave a lot of money that they believe satisfies all the gifts listed in their will. They total all their assets, which seems large enough to address all beneficiaries.
However, not all assets pass under the will. This is the difference between probate and non-probate assets.
| Asset Type | How It Is Distributed |
|---|---|
| Probate assets | Pass through the decedent’s estate and are distributed according to the will. |
| Non-probate assets | Pass outside the will, usually through joint ownership or beneficiary designation. |
Probate assets pass through the decedent’s name into their estate and are distributed according to the will. In contrast, non-probate assets pass outside the will, usually by joint ownership or beneficiary designation.
Knowing the difference between these asset classes provides the true value in the estate and helps ensure distribution according to your will. Also, remember your estate will need to deduct any outstanding debts, expenses, and taxes, which will reduce the probate asset number again.
Joint Ownership Additions
It is very easy to add an individual as a joint owner with rights of survivorship of an asset such as a bank account or piece of real estate.
However, if your will relies on that asset being part of your estate to pay others (or debts, expenses, and taxes), there may be a problem.
Joint ownership can often lead to will contests and lengthy court battles. Before adding a joint owner, speak with your estate planning attorney and proceed cautiously so you do not upset the existing estate plan.
Changes to Beneficiary Designations
Beneficiary designation changes can have unintended consequences on your estate plan. The most common problems occur with changes to beneficiaries in life insurance policies.
The policy may be payable to your trust to cover the cost of bequests, pay estate taxes, or shelter monies from estate taxes.
Similarly, a retirement account due to an individual but changed to another may result in adverse income tax consequences. You may upend the intention of your estate plan by casually changing a beneficiary designation.
Review Your Estate Plan Regularly
These are some of the more common mistakes people make that can negatively affect your estate planning goals.
Regularly review your intentions and legal documents with your estate planning attorney to clarify changes in assets and asset types, lifetime gifts, beneficiary designations, and joint ownership additions.
Doing so will keep your legacy as you intend it to be.
To learn more about how one of our experienced elder law attorneys can assist you or a loved one, please contact us at (352) 565-7737! We look forward to hearing from you.
