ElderLaw News-The Estate Planning & Elder Law Firm, P.C. — MD, VA, DC
ElderLaw News
ElderLaw News is a weekly e-newsletter that brings you reports of legal developments and other trends of vital interest to seniors and their advocates. This newsletter is brought to you by The Estate Planning & Elder Law Firm, P.C., William S. Fralin, Esq., President., William S. Fralin, Esq., President.

Common Mistakes In "Do It Yourself" Estate Planning

Although it is not advisable to do so, many people decide to plan their estates without professional assistance.

This newsletter will address common errors and oversights people make when planning their affairs in this manner. It is noteworthy, however, that even if one is using a professional advisor, if he or she is inexperienced in estate planning, these same mistakes may occur.

I. The Failure To Properly Analyze The Titling Of Assets And Beneficiary Designations

Many people who plan their estates without professional assistance overlook issues such as joint titling and beneficiary designations. One’s Last Will and Testament only governs the disposition of certain assets. Over the last twenty years, there has been a rapid increase in the use of non-probate titling mechanisms, such as Transfer-on-Death and Payable-on-Death accounts. Moreover, jointly-titled assets pass automatically to the surviving owner, and are not governed by a Last Will and Testament or Revocable Trust.

II. The Failure To Manage Incapacity

While people often associate estate planning with passing away, incapacity is one of the biggest challenges families face as their loved ones age. Medical advances have made it possible for people to live for extensive periods of time after they have lost their ability to manage their personal finances. Diseases such as Alzheimer’s Disease, Parkinson’s Disease, and Dementia have imposed financial hardship upon many elderly Americans. The cost of long-term care is on the rise, and without a proper incapacity plan in place, a family may be forced to spend the entirety of its wealth on long-term care. Having a proper Power of Attorney in place allows for one’s family to re-title or restructure assets in order to apply for long-term care benefits. A properly-drafted Power of Attorney also allows loved ones to contract with assisted living facilities.

III. Problems With Taxation And Fees

There are many forms of taxation which are commonly overlooked when people plan their estates without professional representation. The taxation system includes the Estate Tax, the Gift Tax, the Alternative Minimum Tax, the taxation of Trusts, as well as tax issues on the state level, such as the Probate Tax. While careful study can assist one in avoiding these taxes, professionals often know how these tax systems intersect at death, and thus can review an estate in a holistic manner. Issues such as planning for a step-up in basis at death are often overlooked by those who do not have professional assistance.

IV. Problems With Fiduciary Selection

Many people who decide to draft their own holographic Last Will and Testament, for example, fail to choose a successor Executor to serve, if their first Executor is unable to do so. People fail to serve as Executor for many reasons, and having at least one backup is a good idea. A chosen person may move away or simply decide they do not want to take on the responsibility of being a fiduciary. One must actively manage conflicts of interest in an estate plan; conflicts of interest can dramatically change over time. The trustworthy uncle or aunt who used to lead a balanced life may have come across hard times. As people’s lives change, their ability to serve as a trustworthy and prudent fiduciary may change as well. Thus, fiduciary selection merits careful reflection and frequent review.

V. Problems With Fiduciary Compensation

One should consider carefully whether a fiduciary should be compensated. Common fiduciaries are Trustees under a Revocable Trust, Executors under a Last Will and Testament, and Agents under a Power of Attorney. It is common to choose a family member to manage personal financial matters. However, many family members may find it hard to act without being reimbursed for out-of-pocket expenses, especially if they have to travel to serve. Those who serve without compensation may be tempted to co-mingle assets in an estate with their own. However, if compensation is available, it should be commensurate with the services being rendered by the fiduciary.

VI. The Failure To Consistently Update An Estate Plan

Ideally, estate planning documents should be reviewed every three to five years. Laws, assets, and personal wishes change frequently. Even if one's wishes have not changed, family dynamics change. If one moves to a new location, an update may be appropriate. Many estate plans fail due to an issue which frequent review would have addressed.


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The Estate Planning & Elder Law Firm, P.C.

The Estate Planning & Elder Law Firm, P.C. is an elder law firm. We represent older persons, disabled persons, their families, and their advocates. The practice of elder law includes estate planning, estate and trust administration, powers of attorney, advance medical directives, titling of assets and designations of beneficiaries, guardianships, conservatorships, and public entitlements such as Medicaid, Medicare, Social Security, and SSI, disability planning, income tax planning and preparation, care management, and fiduciary services. For more information about The Estate Planning & Elder Law Firm, P.C., please visit our website at http://www.chroniccareadvocacy.com.

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This newsletter is not intended as a substitute for legal counsel. While every precaution has been taken to make this newsletter accurate, we assume no responsibility for errors, omissions, or damages resulting from the use of the information in this newsletter. The Estate Planning & Elder Law Firm, P.C. thanks the law firm of Hook Law Center for their input to this newsletter.

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