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Almost everyone who wants to have an estate plan has good intentions.  However, simple but terrible mistakes often lead to tragedy.  Here are five common mistakes so you can avoid them.

5 Common Yet Tragic Estate Planning Mistakes

1. Not having a plan

Colorado has laws that govern how property is distributed to your heirs if you have no estate plan.  However, that does not mean that those laws line up with your wishes, and assuming that they do would be a mistake. 

  • Often, family members receive a certain percentage of your estate to them, depending on their relationship to you.  Non-family members (including an unmarried partner), have no rights to your estate.
  • In blended families, your surviving spouse shares your estate with your children, which often means that your surviving spouse does not have enough money to survive.
  • If your children are younger than 21, the probate court will implement a conservatorship and be involved in your children’s lives until they turn 21, when they receive their inheritance in full.  For most parents, neither the conservatorship nor the outright inheritance at 21 are desirable.

2. Not naming a guardian for minor children

A will is the only document that can name a guardian for your children.  If you do not name a guardian, then the court will have to make a decision on who will raise your children with no input from you.

  • If no one takes your children, they may be put into the foster system.
  • If multiple people want to take your children, the judge has to decide and that process may tear the family apart.

3. Relying on joint ownership

Many parents put their children on an asset, whether it be a home or bank accounts.  However, this is a mistake.

  • Adding another owner means you lose control over your property, and your child has to agree on all decisions.  That co-owned property can also become subject to a divorce, bankruptcy proceedings, or bad spending on the part of your child.
  • Making these gifts may actually have income tax or gift tax consequences that you were not aware of.
  • If you only put one child on an account, and you have more than one child, you may end up disinheriting children or giving them different amounts of money after you pass.

4. Not planning for incapacity

Most people have a vision of how they will pass, and it is almost always at home, surrounded by family.  Unfortunately, that almost never happens.  Incapacity often comes before death, and many people do not actually plan for this.

  • With no incapacity planning, the court gets and stays involved for as long as your are incapacitated, even if that lasts for years.
  • The court’s involvement is public, expensive, the court has the final say, and is hard to end.
  • Incapacity planning involves both financial and medical situations, so comprehensive planning is required.
  • If you do not express your opinion, you may be kept alive by artificial means for an indefinite period of time. A perfect example of this is Terri Schiavo, who was kept alive for 15 years after she entered her vegetative state.
  • The exorbitant costs of long-term care, most of which are not covered by health insurance or Medicare, must also be part of incapacity planning.

5. Not keeping your plan up to date

Estate planning deals with life and everything that is a part of it: personal, family, finances, laws, and the future.  All of these things change.  It is important that your estate plan keeps up with life so that your estate plan does what you want it to right now, rather than what you wanted five years ago.

  • Review your estate plan every two years to see if it still distributes money out how you want.
  • Talk with your estate planning attorney to see if they will update you on any legal changes that affect your plan.

Final Thoughts

If you want to avoid these 5 common yet tragic estate planning mistakes, contact The Rains Law Firm or schedule a complimentary initial meeting to discuss how you can prevent them and protect your family.