The WAY to WOW Shows
Avoid Common Estate Planning Mistakes
July 24, 2023
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[0:12] hello and welcome to trusts and Estates weekly hmm my voice is changing which is strange because I'm really no longer a teenager let me get myself into frame here better I'm your host Kevin Bammel and we are here every Monday morning 10 a.m uh Pacific time and 1 8 1 p.m eastern time with an hour in for Central and mountain time and we discuss all things related to trusts Estates probate both on the planning side for you and your own uh Estate Planning and also

[0:50] from the standpoint of professionals who are interested in helping people with their Estate Planning and the execution of those plans so today I'm going to talk about the common mistakes that are made in Estate Planning and I have my Rusty um PowerPoint here which makes it easier to follow along you know in case you're wondering why I typically do a PowerPoint it's because when it comes to learning things people

[1:27] learn better when they see and hear the information and so this is designed to help you absorb what we're talking about more thoroughly and also I mean do you really want to look at you know this the whole time and nothing else you know this this beautiful sort of you know picture of wood has got to be better than looking at me for the whole for the whole uh show anyway I trust in the states weekly here we go and as always we are here in the pursuit pillar of the three pillars of attainment dealing with finances

[2:03] and here we go so we're going to look at how you avoid common estate planning mistakes okay so the first thing that you want to keep in mind is in many many cases an estate plan is going to need more than one part so you want to make sure that it's comprehensive okay now you you almost for sure are going to need a will okay not always and

[2:39] if you go to our YouTube channel you'll see I did a show I think it was two weeks ago on ways to avoid probate so if you have uh very little property and it's the kind that can pass to your beneficiaries outside of probate so you may not even need a will that's going to be something that you're going to have to look out for your individual circumstances but most of us are going to need at least a will okay and and as we've talked about again in previous

[3:15] um shows a will is a document that designates what's going to happen with your property after you die so presumably it's going to go to your heirs in the absence of any of these the the state in which you live is going to decide who gets your property and again I've done a show on intestate succession that means intestate means without essentially any kind of document describing or not describing but designating who it is gets your property okay so there's probably going to be

[3:52] you're probably going to have some kind of will now in many cases you probably you may also have a trust typically it's going to be probably a living trust now again this is just general information this is this doesn't necessarily apply to your specific situation you're going to need to get professional advice on based on who you know what kind of property you have how many errors you have you know what kind of value those properties have all those kind of things are going to play into what kind of

[4:30] uh documentation you're going to need in a comprehensive estate plan now here in California for example if you own a house you're probably going to need a trust a living trust okay because if that if that um house has any amount uh well if it has yeah not any not literally any amount of equity but if if you've built up some Equity over the years so it's going to pull you into probate um pretty quickly unless you have a

[5:05] trust that designates what's going to happen with that house when you pass away and making sure that it passes to your uh your heirs outside of probate and therefore you avoid the costs and time associated with probate okay now let me quickly add that just because you have a trust doesn't mean you don't need a will so in my estate plan I have both a trust and a will they are for different purposes okay and so when you do your estate planning your

[5:41] advisors are going to look at your overall situation and like I said you may end up doing both now last week we talked about Powers of Attorney okay and a comprehensive estate plan may also mean that you need a power of attorney so for example you may have a springing power of attorney and again if you want to go to our YouTube channel we talk we talk about different types of Powers of Attorney in more detail but a springing power of attorney is a power of attorney that becomes active when a particular

[6:16] event happens okay so for example you can have a type of durable power of attorney call for uh called a springing power of attorney for Health Care uh Health Care decisions I should say and that that Health that that power of attorney okay which sits dormant until something happens in your health that causes it to spring into action in essence okay so and by the way there may be needs for other powers of attorney depending on

[6:53] your situation okay um and and you may designate um an attorney in fact which is the power of attorney designate someone as your attorney in fact someone to act in your stead okay act in your place now you as part of a comprehensive estate plan you may decide to appoint a power of attorney to handle certain matters okay um because I don't know you want to do a lot of traveling for example and you don't want and and you're concerned about uh day-to-day matters being handled in your absence so

[7:29] perhaps you'll want a power of attorney for someone to handle that and that way you know when you're out of the country or whatever traveling around you don't have to worry about all the day-to-day stuff okay and and then you know that power of attorney may be limited and so if there's a significant decision that has to be made so then the you know the your attorney in fact will need to get in touch with you and and that'll have to be dealt with and you know maybe a significant if issue only comes up you know once in a while and so for the most

[8:04] part the power of attorney allows that person to act on your behalf it's no big deal right and you can go on with your life okay finally you may need health care directives now a springing power of attorney is a type of Health Care directive and there may be others you know what's going to happen if you're incapacitated how is that going to be uh how is that going to be handled um how are you going to handle the situation where perhaps um your um uh uh um

[8:39] your your rendered into a state where the doctors think that um you know you're never going you're you're in a coma you're never going to recover um they're keeping you alive on uh life support systems you know are you gonna have do you know do not resuscitate orders are you going to remove uh you know life-sustaining technology at some point all of those may need to go into Health Care directives and by the way if you don't want those things to happen that may

[9:16] need to happen as well so if you want all Extraordinary means used to keep you alive right maybe maybe you have um a religious imperative that requires that that you handle your health care in that way so Then You're Gonna Want Your Health Care directives to reflect those those religious values that you have and make sure to make sure that in the event you do become non-responsive nonetheless you know they won't you know pull the the proverbial plug on you or something like that now I I appreciate these these topics can be

[9:53] uncomfortable and and um I I I don't mean to make light of them I just want to kind of keep the tone of this a little bit on the lighter side because I you know no no point in in us um you know depressing each other over these matters and they are you know the inevitabilities of life and and you know as adults we need to face up to them and and deal with the situations um that that that uh you know we we may be faced with and just you know then we can go on with our day so to speak okay

[10:28] so that is one common uh mistake estate planning mistake we want to avoid a second is we want to do regular updates to reflect changes okay so once you have a comprehensive estate plan that doesn't mean that you're done it's like okay well I've done that now I have to worry about it anymore no that's not the case Okay changes may require that you update or at least change your estate plan so your personal

[11:04] circumstances may change so for example you may acquire another property maybe you buy you know a second residence um in in some place where you really like to go in vacation okay well you got to make sure that that residence is if you have a trust transferred into your trust if you have a will you got to make sure that it's addressed in your will okay maybe um uh you you sell a business and maybe your your uh will or trust was set up so

[11:39] that you know one Heir got the business and the other maybe got some other Investments and now that the business is sold okay in essence that that air who is going to get the business has been disinherited because the business has now been converted into other types of Investments okay so uh it again it may be that you uh need to uh update your your how your beneficiaries are treated okay um and and and then you know all of the attended documents that go with that

[12:14] okay so personal circumstances can change and that means you need to you need to at least consider will the change in those personal circumstances necessitate updating my estate plan next tax laws change okay so um the um um well we talked about this uh a few weeks ago the um lifetime gift exemption I believe is changing I want to say at the end of 2025. um I think the estate uh the the estate

[12:51] value exclusion is also going to change around that same time okay so the fact that tax laws may be changing in a year and a half or maybe it's two and a half years so that may necessitate reviewing your estate plan and potentially making some changes okay and we're going to I'll talk a little bit more about that um I think in the the next slide or two all right but the the fact of the matter is that uh tax laws do change periodically so even if your estate plan

[13:26] is already done and and it's it's it's been good for the last whatever it's been five ten years that doesn't mean that going forward it it can just stay that way you may very well need to make some changes based on on uh changes in in the tax line now it can be a little bit difficult right because tax laws sometimes tax laws change automatically and then right before they change you know Congress passes an extension or something like that so this is why you want to talk to your advisors

[14:01] talk to people who are following these issues and know a lot about them and and get their advice on what you what it would be best for you to do finally family Dynamics can change okay so God forbid maybe one of your beneficiaries passed so passes away is that going to affect your estate plan okay maybe one of your beneficiaries gets married or maybe one of your children has children so now you have grandchildren or maybe your

[14:36] grandchildren have children now you have great grandchildren do you want to change your estate plan to take into account that that next Generation okay maybe you want to set up you know or allocate money for college for them or something like that or maybe maybe you want to sit up a 529 plan for them now okay which again that that may necessitate changes in your broader comprehensive estate plan okay now you know maybe you've had a falling out with someone in your family okay and maybe

[15:12] you want to disinherit them um you know those things happen in in any family they can happen right so if that's the case it's it's not enough to intend to disinherit them the documents have to reflect that and in many cases um to sustain the disinheritance the documents have to specifically say I intend for this individual to not get anything otherwise that person may if if your documents are silent about them that person may still retain a claim

[15:50] again these things can vary by state so if if that's something you intend to do talk to your talk to your lawyer talk to your financial advisors how do you best deal with this now the the the fundamental purpose for doing regular updates to reflect changes is to avoid unintended unintended consequences and disputes okay so for example let's say that you know you want to disinherit one of your children okay

[16:25] um but it's not specific in the documents that they're disinherited you just you would just originally you had attended them for to get certain assets and you just pulled their name out okay well when after you pass away your your children who you do want to inherit could end up in a dispute with a disinherited child because it's not clear that that's what you intended okay and now all of a sudden you're you're a state could be subject to legal fees by by having to fight that that claim by the

[17:00] um disinherited child because it wasn't clear okay by the way the same thing Could Happen let's say you were estranged from a child and you patched things up um and and now you want the child to inherit okay but that wasn't specifically set up in your estate plan either so after you pass away I mean I I hate to say it but I've seen cases where you know children fight each other tooth and nail in order to you know get a larger share of the assets of their

[17:35] deceased parents so any change in family Dynamics should be examined to determine if it requires a change in any of the documents in your estate plan all right let's go to the next one oh oops I went the wrong way what am I doing here I'm getting the wrong buttons Okay so um next asset titling and beneficiary dentist designations Okay so um some assets and pass to errors without having to go

[18:12] through probate and without necessarily having to be in a trust and that can be very beneficial for example retirement plans they can be set up in a way that when you die they go to your Heir okay but they've got to be titled properly meaning the account vesting has to be set up properly and the beneficiaries have to be set up properly okay and and you know again I I keep I keep emphasizing this all of this is handled by state law and the law is not the same

[18:47] in all 50 states plus the territory so uh you know all of this needs to be done in accordance with the state in which you're a resident generally speaking okay um by the way though if you've got Assets in another state it's it's well to check out do you have to comply with that other states rules as well okay so I wouldn't leave anything to Chance the extra couple of hours it may take of attorney's time to check these things out could save a big big problem down the line for you or your heirs okay so

[19:22] life insurance policies you know again um well life insurance policies generally um they don't go through probate they don't uh go into a trust um sometimes they're set up to pay estate taxes sometimes they're set up in order to provide um somebody that you leave behind with the assets they need to be able to continue their life okay they need that beneficiaries need to be properly designated they need to be kept up to date okay and and and all of that needs to be

[19:58] reviewed periodically just just as we as as the other issues we were talking about a moment ago okay investment accounts so sometimes investment accounts can have what's called a transfer on death function where um you own it during your lifetime and then once you die um you you know your air the beneficiary of the account will submit a copy of the death certificate uh to the account holding um company and and it will transfer to

[20:35] the beneficiaries on death it doesn't have to go through probate doesn't have to be in a trust necessarily okay so that's another issue with that that's an issue of again both titling how the account is vested and also making sure that beneficiaries are designated properly okay now I'm going to take a step back because there this is we're under kind of a presumption of your estate plan is already in effect but indeed these some of these things apply if you're in the process of setting up your estate plan so one of the common

[21:11] mistakes that uh estate planning attorneys will tell me about is they'll set up a trust for their client and then the client will never transfer assets into the trust okay so that so that they have a house the house remains in their name you know as an individual and if that's the case the benefit of the trust is lost because in order for the benefits of the trust to be realized the assets the title of the assets has to be put in in the trust name not kept

[21:46] in the individual's name okay and so there's going to have to be Deeds prepared in some cases depending on what the asset is if I could for example if it's real estate um and uh bank accounts and such are going to have to be retitled into uh the name of the trust so that the account vestings are are the trust okay so all of that is part of both setting up a proper estate plan as well as keeping an estate plan up to date wow the time is zooming by okay here we go

[22:22] minimize taxes and estate costs using trusts gifting strategies and charitable giving okay so I I mentioned earlier one of the reasons for setting up a living trust is um you you can you typically avoid going through probate which should save on uh the costs of of administrating the estate okay now um I talked about this a few weeks ago I don't remember exactly when um

[22:57] property that's in a trust does not ex uh does not um Escape um being included in the gross value of your estate for estate tax purposes okay so that all by itself won't minimize estate taxes however there are gifting strategies and charitable giving strategies that can minimize estate taxes okay so during your life and again I refer you to my new my YouTube channel where we talk about um gift taxes and and how all that works

[23:34] you can give um I believe it's twenty thousand dollars a year to any individual you choose and if it's a married couple husband and wife so then you've got forty thousand dollars a year that you could give to them over your lifetime okay up and and that amount that you give to them is subtracted from your lifetime gift uh exclusion but still that may help you minimize or that may help really your beneficiaries minimize estate taxes at the point where you pass

[24:09] away okay same with charitable giving strategies okay so especially if you have a very large if you have a large estate you know several millions of dollars okay where especially if the the law about um exemption on the amount Exempted from estate taxes changes and that an amount goes down this is something you may want to be taking a look at now to see do I need to do you need to come up with some kind of gifting or charitable giving strategy that will help you perhaps stay

[24:46] under that um estate tax exemption level okay so that's something I would uh that you know to talk to your um your attorney about your financial professionals Etc okay finally um you want to commune you want to communicate and get professional guidance I've said this throughout this you want to make sure you're getting professional guidance so you're doing what makes sense for your specific situation these

[25:21] common estate planning mistakes that I've been talking about here for about the last 25 minutes they are common they may or may not apply to you as an individual or you and your spouse as an individual okay it depends on your situation so the fir so you want to do basically two things one is communicate with your family members so they understand your intentions okay now you know you're going to have all these documents but no matter how clearly the documents are

[25:56] written they're not always going to be a hundred percent clear in fact in most cases they're not going to be a hundred percent clear so by talking to your family members making making as as making it as clear as you possibly can how you want your estate handled after you pass away that will increase the likelihood that your wishes will be carried out after you after you're You're gone okay and two um it can potentially prevent disputes between family members

[26:34] if all family members know what your wishes are okay so you know sit down with them explain it to them make sure that they're up to date about the various issues of concern to you okay and and and be as open as you can about them next attorneys financial advisors fiduciaries make sure that you are Consulting with these people especially as as your estate gets larger the more likely you're gonna it is that you're gonna need advice from these kind this

[27:10] kind of professional guidance this kind of professional advice okay [Music] um attorneys who specialize in Estate Planning and Taxation financial advisors who have a background in dealing with it with estate planning matters probate Etc and fiduciaries okay so for example I'm a professional fiduciary one of the things I do is administrate trusts and Estates um you know for for other people okay so include all of these people in your estate planning plans right

[27:46] um to make sure that they understand what it is your intentions are and to make sure that they've got as much information as they can have in helping get documents drawn up and helping execute your wishes all of these things Okay so you know the extra hour you take with your professionals while you know you'll pay another hour of of their fees that again that could make the difference in making sure that your the your wishes are carried out after you're gone unfortunate you know look unfortunately

[28:22] we're all going to pass away at some point and once we're not here anymore there is no way for someone to definitely know what we want to happen and so we've got a plan for that eventuality as unpleasant as that is uh oh I'm sorry this is the last one here so we tailor to the correct and specific jurisdiction I did mention this earlier so I won't spend a lot of time on this but laws vary by state or region region would be like Puerto Rico has has its own laws Guam has its own laws okay and for the most part the law you're

[28:59] going to be dealing with is state to state now if state taxes happen on both a federal and a state level okay so you're going to be dealing with both okay but generally speaking you're going to be dealing with with state law if you if you change your state of residence that may necessitate updating your estate plan okay that's that and you know a lot of people have been mobile during covid um or a lot of people should say yeah we're mobile during covet they changed where what state they're living in and so you want to make sure that your

[29:34] estate plan is up to date so it's tailored to the specific jurisdiction in which it needs to be dealt with okay I think that's the last one yes it is okay so if you want help here's places to contact me all of this information will be in the show notes and so if you have a question you can drop it in the comments uh comment sections on social media you can always send me an email I'm happy to hear from you if you have like I said questions if you have comments good or bad always interested to hear what you have to say

[30:11] and here is uh the legal stuff so we'll close out of that and here you go see see really do you want to look at this the whole time no listen wasn't worth the pictures much nicer than than this punim as we say in in Yiddish so I want to thank you very much for joining me I hope you found this useful and uh um uh if if if you're you know I went pretty fast because you know we don't we only spent about a half an hour together on Monday morning so if if you want to

[30:46] look at it again please go to my YouTube channel it'll be posted and posted there in just a few minutes after we uh sign off from from the show and you can re-watch the episode you can you know kind of scroll through it quickly to see the you know to see the various slides if you want to take notes on those so you can ask your advisors about these various issues encourage you to do that uh and if you'd like to send me an email I'm happy to send you a copy of the PowerPoint presentation if uh you know if you want to you know send it to your

[31:21] your um the professionals with whom you deal and just say hey you know I I saw this thing here and it's only about a half an hour long maybe you could just kind of scroll through it in in five five or ten minutes and um see you know is any of this apply to my situation um and if so you know let me know because we'll need to talk okay so that's our show for today trust in Estates weekly just real quickly tomorrow is my show uh business uh lessons from the military we're continuing our discussion of Marine Corps War fighting Doctrine and as that and applying it to to business so I

[31:58] invite you to join me at 11AM Pacific time tomorrow and then on Wednesday is my show people making money that's at 12 30 p.m Pacific time and I'm going to be talking about how to analyze an investment property quickly so this is a technique that I learned actually several decades ago from a wonderful professor at UCLA extension by the name of William golden uh Professor golden retired quite a number of years ago now and in fact I had the honor of taking

[32:35] over teaching that class after he retired I taught it for many years and I taught my students what I have learned from Professor golden I I I wish I had kept in touch with him I I don't even know if he's if he's you know still alive but I'd like to mention his name because you know great teachers are just they are so powerful and he had an impact on my entire career I've I've adapted what he taught me in in ways that that were work better for me and

[33:10] I'm going to show you that on Wednesday and you and it literally will allow you on one spreadsheet that's you know basically about eight and a half by eleven to analyze and invest all aspects of an investment property uh very quickly so I invite you to join me for that on Wednesday and then next week on Monday we'll be back here again at 10 A.M Pacific time for the next edition of trust and Estates weekly I want to thank you once again for joining me wish you a wonderful rest of the day and just sign off by saying as I always do Marie darling you are my bell all the best

[33:47] folks