Once you’ve decided to create an estate plan to ensure that your property is distributed according to your wishes after your death, the plan should provide you with peace of mind and prevent problems for your family. However, you can only achieve these estate planning goals if you avoid mistakes.
12 Estate Planning Mistakes You Want to Avoid
While each estate plan is unique, there are some common mistakes most people should avoid, including:
- Waiting too long to create a will. No one wants to think about dying. Creating a will and a comprehensive estate plan is probably not at the top of the list of things you want to do. However, accidents happen and your health can change suddenly. Therefore, it is better to be prepared, so your spouse, children, and other loved ones are cared for in the way you want them to be if anything happens to you.
- Failing to update your will after major life changes. Creating an estate plan is not a one-time activity. Your plan may need to be updated periodically to reflect life changes such as marriages, birth or adoption of children or grandchildren, deaths of loved ones, newly acquired property, or a significant change in assets.
- Not planning for heirs with disabilities. If you plan to provide for a child or another heir who cannot manage their own money, you may want to consider special estate planning tools such as a spendthrift trust.
- Choosing an executor who can’t do the job. An executor must have integrity and be willing to fulfill their fiduciary duty. You may choose someone who isn’t up to the job.
- Failing to fund a trust. Revocable or living trusts must be funded to be of any use to your estate plan. If you fail to transfer property or asset ownership to the trust, the property or assets must go through probate rather than be distributed from the trust.
- Failing to consider different types of trusts. Different trusts have different tax implications and can serve your heirs in different ways.
- Naming a single beneficiary. If that beneficiary dies before you and no alternative beneficiary is named, your property may not pass according to your wishes.
- Forgetting about your digital assets. What will happen to your social media accounts and other online accounts after your death? These things may hold little or no monetary value for your heirs, but they may need to be protected after you’re gone.
- Not understanding your plan. Estate plans can be complicated. It’s important to work with an experienced estate planning lawyer who will explain your plan and help you understand the consequences of your estate planning decisions.
- Not telling anyone where to find your will and estate planning documents. You may, for example, keep these documents in a fireproof safe in your home where no one else has access.
- Trying to draft your own estate plan. Louisiana law allows for many estate planning tools. You don’t know what you don’t know, and you may end up making a mistake if you don’t work with an experienced estate planning lawyer.
- Failing to plan for your own incapacity or disability. Medical and healthcare powers of attorney, advance directives, and disability insurance may be essential parts of your estate plan. Without these documents and insurance, your own wishes may not be honored if you are hurt or become sick and can’t take care of your financial obligations, make healthcare decisions, or earn an income.
An Estate Planning Lawyer Can Help You Prevent Mistakes and Protect Your Family
You don’t need to know all the answers. You just need to know that you want to protect your loved ones and take control of how your property will be distributed. Contact an experienced Louisiana estate planning lawyer for help that you can trust. We will develop a plan that is right for you. Call us, or contact us through our website to get started today.
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Failing to Update Your Estate Plan After Major Life Changes
An estate plan that was carefully prepared ten or twenty years ago may be completely out of step with your current life circumstances. Divorce, remarriage, the birth of children or grandchildren, the death of a named beneficiary, the acquisition of significant new assets, a child reaching adulthood, a major change in net worth — each of these events can render provisions in an existing will, trust, or beneficiary designation obsolete or actively harmful. Louisiana law does not automatically update beneficiary designations or will provisions when life changes; the document continues to say what it says until the person who created it takes action to change it.
The most damaging version of this mistake is failing to update beneficiary designations after a divorce. Louisiana does not automatically revoke beneficiary designations on retirement accounts, life insurance policies, or bank accounts when the account holder divorces. An ex-spouse designated before the divorce remains the designated beneficiary and will receive those assets at the account holder’s death unless the designation is affirmatively changed. This error regularly results in ex-spouses receiving assets worth hundreds of thousands of dollars that the decedent clearly did not intend for them to receive — a result that surprises families but is legally enforceable under the account contract.
Major asset acquisitions also require updating an estate plan. A will drafted before the purchase of a commercial property, a business interest, or a significant investment account may not address these assets adequately. A will that leaves “all my property” to named heirs generally covers subsequently acquired property, but specific planning considerations — how a business interest transfers, whether a new property should be held in trust, how the new asset affects the forced portion calculation for forced heirs — require attention that a general clause does not provide. Annual or biennial estate plan reviews with a succession attorney catch these gaps before they become problems at the worst possible time.
Ignoring Non-Probate Assets in Your Estate Plan
Many Louisiana residents create a will without realizing that a significant portion of their wealth will never be governed by that will. Life insurance proceeds paid to a named beneficiary, retirement accounts with designated beneficiaries, payable-on-death bank accounts, and assets held in a living trust all pass outside the will — they go to the designated recipients by contract or by trust document, not by the testamentary plan. A will that leaves everything equally to three children has no effect on a life insurance policy that names only one of those children as the sole beneficiary. The policy pays to the named beneficiary, and the will cannot override it.
The coordination failure between the will and non-probate assets is one of the most common sources of unintended inequality in estate distributions. Consider a Louisiana estate where the will divides everything equally but one child is named as the sole beneficiary on retirement accounts worth $400,000. The equal distribution under the will applies only to the probate estate; the $400,000 retirement account goes entirely to the named child regardless of what the will says. The result is a dramatically unequal distribution that the testator likely did not intend. Reviewing the beneficiary designations on all accounts as part of the estate planning process — and ensuring they are consistent with the overall plan — prevents this type of outcome.
Naming a minor child as a direct beneficiary on a life insurance policy or retirement account is a related mistake. Minor children cannot legally receive large sums of money directly — a court-appointed curator must be obtained to manage the funds until the child reaches adulthood, which is an expensive, time-consuming, and public process. Naming a trust for the child’s benefit as the beneficiary, or naming a custodian under the Uniform Transfers to Minors Act, allows the funds to be managed efficiently without court involvement. Planning for minor beneficiaries requires thought about not just who receives the asset but how they receive it and who manages it in the interim.
Louisiana-Specific Mistakes: Forced Heirship and Community Property Oversights
Louisiana’s forced heirship rules catch many estate planners — and many attorneys from other states — off guard. A testator who has children under age 24 or permanently incapacitated children of any age cannot leave those children out of the estate plan without valid legal grounds. An estate plan that gives everything to the surviving spouse, to charity, or to adult children while completely excluding a forced heir is legally defective — the excluded forced heir can challenge the disposition and receive their mandatory share regardless of what the will says. Attorneys from other states drafting Louisiana estate plans must understand this concept, which has no equivalent in most common-law states.
Community property characterization errors are another Louisiana-specific problem. Louisiana’s community property regime means that assets acquired during marriage may be community property even if they are titled in only one spouse’s name. An estate plan that treats all titled assets as the title holder’s separate property — which would be appropriate in a common-law state but is wrong in Louisiana — may significantly undercount the surviving spouse’s community property ownership and misallocate the estate. Attorneys and families who did not grow up in a community property state and are unfamiliar with the concept are especially vulnerable to this error.
Failing to plan for the usufruct is a related error specific to Louisiana. In a default Louisiana succession with descendants surviving, the surviving spouse receives a usufruct — a right to use community property during their lifetime — rather than full ownership. Many couples are unaware of this rule and assume the surviving spouse will simply “own everything” after the first death. When a married couple with children owns significant community property and neither has a will, the surviving spouse may be shocked to learn that they cannot sell the family home without the children’s agreement — because the children own the naked ownership of the decedent’s half even while the surviving spouse holds the usufruct. A will that specifically addresses the usufruct question — either confirming or modifying the default — eliminates this surprise.