You may think that I’m being harsh, but I’ve seen a lot of stuff in the estate planning world that can only be described as not smart. So, in a good faith attempt to prevent further “dumbness”, this article will offer insight into 7 Florida estate planning mistakes that can make you look dumb later if not corrected.
For example, James Gandolfini, the highly acclaimed “Sopranos” star, passed away at age 51 with an estimated 70 multi-million dollar estate. Although he updated his will just 6 months prior to his death, his estate plan included little estate tax planning and his estate owed an estimated 30 million in Federal estate taxes. His will was described as a “tax disaster”.
On a smaller scale, to put it bluntly, I’ve seen lots of other dumb stuff. I have a few theories about this, one of which is the fear of our own mortality. I preface this article by saying that I’m not being callous in referring to these mistakes as dumb. I only mean that all of these common mistakes can be easily prevented.
So, this article highlights 7 Florida estate planning mistakes that make you look dumb. Don’t look dumb…check out this article.
7 Estate Planning Mistakes, in Florida, That Make You Look Dumb
1. Failure to make proper beneficiary designations on your insurance policies, IRAs, 401ks, Annuities, etc.
The thing to remember is: if the beneficiary designation on your account is “the estate of” (or something to this affect), then that asset will need to go through the probate court process in order to be distributed to your beneficiaries. What that means is, instead of the insurance company simply “cutting a check” to your beneficiaries, the entire account will be tied up in a court for potentially 6 months or more and will be subject to probate fees of approximately 1%-10% of the asset values. You can do the math on a $500,000 insurance death benefit, and this could have been prevented in 5 minutes with a simple beneficiary designation change.
2. Failure to have documents properly witnessed or notarized.
This one could be described as a “legal zoom” specialty. Unfortunately, the “form pusher” websites often do not explain the formalities necessary to properly execute estate planning documents, and this is because they don’t need to do so. By definition, “self help” legal services just leave all the nitty gritty details up to you. This type of error can result in a “last will” not being admitted to probate or being disqualified due to an “interested witness” having witnessed the will and also receiving a share of the estate.
3. Failure to retitle assets in the name of a Revocable Living Trust.
It is extremely common for folks who have gone through the expense and effort of setting up a Florida revocable living trust and thereafter forget to “fund the trust”. The net result of a failure to fund a Florida living trust is that all of the assets must go to probate.
4. Failure to appoint the right family members to the right positions.
This one may not seem as obvious; however, I mention it because it has crossed my mind on a regular basis and really does make the deceased parent look dumb. For example, I have marveled on occasion why a parent with a reasonable estate plan and some assets upon death would have appointed “hothead Timmy” as the personal representative of the estate at the expense of 4 other siblings. While this move doesn’t disqualify the estate or lead to probate, it can certainly lead to estate litigation which can drain an estate faster than a Florida sinkhole.
5. Opting out of Trust planning under the assumption that “everyone will just get along”.
Often times, folks get a bit overwhelmed with the estate planning process and insist that things just need to be “simple”. So, their conclusion is that a simple will will suffice and will lead to the easiest resolution for the estate, and yet nothing could be further from the truth. It is easy to forget that simple wills must be reviewed by a Judge in the probate court and in most cases, the simpler the will, the more things that are left out. You get the picture…when things are omitted, people often times do the opposite of getting along.
6. Failure to Consider the Implications of Jointly Titling Assets With Adult Children.
Again, under the guise of a “simpler plan” some conclude that it is a great idea to just put the kids’ names on everything. This is really dumb in most cases because it exposes the parents’ assets to all of the potential legal hassles of the adult children. For example, a few years ago, Tommy was an upstanding young man with a great job and picture perfect marriage. Fast forward, and Tommy is in the midst of a heated divorce and a full blown economic crisis. Sorry mom and dad, your assets are now entangled in Tommy’s legal affairs and this cannot be easily undone. Thus, jointly titling assets with adult children as a Florida estate planning strategy should be avoided. All of this can be better accomplished through simple proper planning with a Florida revocable living trust.
7. Failure to have any estate planning documents.
I couldn’t close this article without mentioning the most obvious. One of the leaders of the 7 Florida estate planning mistakes that make folks look dumb when they die is when they did absolutely nothing to address what should happen to the estate. After all, the heirs look back and scratch their collective head thinking…they had plenty of time…what gives. When people fail to prepare any estate documents, the probate court has to go through the exercise of applying the default statutory guidelines. This is the state’s estate plan for your family and it is often not what the parents would have preferred.
So these 7 Florida estate planning mistakes are a start as there are lots of other dumb things people do with their estate planning in Florida. However, applying these tips should keep you in good stead and prevent at least the most obvious.
For more on the James Gandolfini last will debacle, check out…6 lessons learned from James Gandolfini’s will.
Steve Gibbs, Esq.
This is an updated version of a previous article published on October 8, 2015.