Common Estate Planning Mistakes Baby Boomers Should Avoid

Baby boomers, or those born between 1946 and 1964, are starting to retire in droves. For these people (and everyone else), it is important to create an estate plan to help protect assets and ensure that wishes are met in the event of death or incapacity. In doing so, it is critical to avoid mistakes that can cost time, money, and aggravation.

When it comes to estate planning, any number of oversights can leave you vulnerable in the event you become incapacitated. Other mistakes can seriously compromise the amount your heirs will inherit when you die. The following are some common estate planning mistakes that baby boomers should avoid:

– Not Planning for Long-Term Care: Most seniors today ignore the greatest financial risk they face — the disastrous expenses of long-term care and how these costs might affect their assets. According to NPR, there isn’t one state where long-term care is affordable for middle-class families. In fact, when paid out of pocket, home care services on average consume 84% of the income of a typical older middle-income family. Nursing home care paid out of pocket would consume a whopping 246% of the income of a typical older middle-income family. And these percentages are based on the national averages which are significantly lower than the rates in the DC Metro area (which can range from $10,000-$14,000 a month). Without proper long-term care planning, the expenses of long-term care are likely to significantly deplete or even wipe your savings and investments before you die.  As I have said hundreds if not thousands of times, “the best estate plan in the world is useless if you fail to plan for long-term care.”

– Failing to regularly update your plan:  Things change in life . . .  such as your health, your family situation, your marital status, your financial situation, and the people you trust to make decisions on your behalf . . . and your estate plan needs to be updated regularly in order to take these things into account. In fact, failing to make regular updates to your estate plan can have disastrous consequences. We recommend reviewing your estate plan annually and making changes as soon as they become necessary. Read our recent article on this topic for more details.

– Avoid Online Do-it-Yourself (DIY) Wills:  Estate planning documents are not something you should do yourself, just as you should not perform surgery on yourself. If you try to prepare legal documents for yourself, there is a great likelihood of making serious legal mistakes or oversights, and you’ll never know because these mistakes and oversights won’t become apparent until you die. And the people left to deal with your mistakes and oversights are the ones you’re probably trying to protect.

– Never Prepare Legal Documents for Someone Else:  Don’t even think about preparing or helping to prepare legal documents for a friend or family member. If you’re not an attorney, preparing or helping to prepare legal documents for another person is a crime called the “unauthorized practice of law” — in Virginia, it’s a Class 1 misdemeanor and can subject you to jail time for up to a year plus a fine of up to $2,500.

– Avoid Using Only a Will, Altogether: It is generally unwise to use a Last Will and Testament to distribute your Estate at death.  Instead, you should almost always use a Living Trust.  When you use a Last Will and Testament instead of a Living Trust, your financial affairs – and the financial affairs of your beneficiaries – become known to the public and will have to go through the nightmare of probate.

– Make sure to have proper Incapacity Planning Documents in Place, including a Financial Power of Attorney and Advance Medical Directive: When you give someone Financial Power of Attorney, you are giving that person the right to handle your financial and legal affairs in the event you become unable to do so. The document typically goes into effect immediately after it is signed, but it intended to be used by your Agent only when needed. Having a Financial Power of Attorney avoids the “nightmare of living probate” — the time consuming, expensive, and publicly embarrassing process whereby someone has to go to court to have you declared mentally or physically incompetent and have a judge appoint someone to serve as your legal guardian and conservator, which process is subject to ongoing court supervision and probate for the remainder of your lifetime. Again, be aware that DIY forms may not be valid, or may lack an adequate scope of powers.  As with anything, if it’s worth doing (which it absolutely is), then it’s worth doing right.

– Don’t Give Your Home to Your Children: Many baby boomers have children in their 30’s and 40’s with young families. It is completely understandable to want to transfer your home to them to ensure that they are provided for later and so that the home remains in the family. Unfortunately, there are many misconceptions that lead parents to make the wrong moves, which may have disastrous consequences in the future, such as debts of children, multiple children, future family discord, taxes, and Medicaid eligibility. Read more about this in our blog post, “Should I Give My Home to My Children?”

Most baby boomers work their entire lives to accumulate what they own.  Everyone needs the peace of mind that comes with making sure that their legal and financial affairs are taken care of if they become incapacitated, that decisions about health care are carried out the way they’d like even if they’re not able to make them, and that their loved ones are taken care of when that time eventually comes. To begin your Estate Planning or to update your existing documents, please call us at 703-691-1888 in Fairfax, 540-479-1435 in Fredericksburg, 301-519-8041 in Rockville, MD, or 202-587-2797 in Washington, DC to make an appointment for an initial consultation, or sign up for one of our upcoming seminars.