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Leslie Daff, JD, MBA - Orange County Estate Planning Lawyer

Monday, October 13, 2008

23 Common Estate Planning Mistakes

1.  Failing to plan.

2.  Not planning for both death and incapacity.

3.  Not funding, or only partially funding, your living trust.

4.  Forgetting to name or failing to update agents, executors, and trustees in your estate planning documents. 
5.  Not taking advantage of both estate tax exemption amounts ($2 million in 2008) available to married couples, due to inadequate planning.
6.  Inappropriate formula funding clause for subtrusts used in a trust for a married couple and the attendant potential exposure to capital gains tax.
7.  Married couple holding property in joint tenancy rather than community property and not benefiting from the double step-up in cost basis.
8.  Inadequate beneficiary designations for insurance policies, retirement plans, and IRAs - beneficiary designations that do not coordinate with the rest of your estate plan.  
9.  Neglecting to properly structure a business venture or entity to protect personal assets from creditors and failing to follow through on formalities (e.g., holding regular owner and board of director meetings, preparing written minutes to include in the entity's records, and/or respecting other formalities to assure the entity is honored for all purposes).
10.  Neglecting to have an owners' agreement and a binding buy-sell arrangement when you own a business with another or others.
11.  Failing to properly plan for family business succession. 
12.  Not creating flexibility or addressing liquidity needs in the design of your estate plan.
13.  Not taking a holistic view by considering the financial and tax ramifications of every personal, investment, or business decision.
14.  Failing to structure trusts for asset protection purposes (i.e., inability, disability, creditors, divorcing spouses, and predators of beneficiaries – e.g., lifetime beneficiary-controlled trusts) in your estate plan.
15.  Failing to fund your buy-sell agreement or family entity, such as a family limited partnership or family limited liability company.
16.  Forgetting to consider the options available to finance long-term care needs.

17.  Waiting too long to create or update a plan.

18.  Not leaving a “paper trail” and location list.

19.  Not having an appropriate definition of "incapacity" in your estate planning documents.

20.  Not having an Advance Health Care Directive wallet card to alert medical professionals about whom to contact in the event of emergency if/when you are not able to make medical decisions for yourself.

21.  Not having an executed HIPAA authorization form to circumvent medical privacy laws so that  your designated agent can discuss your care with medical professionals in the event you are incapacitated

22.  Do-it-yourself estate planning, such as adding your child as a joint tenant on title to your real property, being unaware and uninformed about the attendant risks and problems of such an approach.

23.  Not hiring appropriate professionals to advise you and/or trying to scrimp on estate planning.

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