Avoid These Common Estate Planning Mistakes
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Avoid These Common Estate Planning Mistakes

Jan 5, 2022 | Articles, Estate Planning, Probate

by Mary Ellen Flynn, Esq.

In my experience, I have seen many people make costly mistakes in their estate planning that have caused their property to fall into the wrong hands after their death. Here are some common estate planning mistakes that you and your loved ones should be aware of:

1. Not having an estate plan at all.

It is essential to understand that if you do not have a valid Will explaining how you want your property to be distributed upon your death, Maryland has a set of default rules that will determine who will inherit from your estate. These rules are found in the Maryland Intestacy Statutes. If you do not execute a valid Will, you will have no say over where your assets go. If you are married with children and die intestate, a large percentage of your estate will be distributed to your children instead of your surviving spouse. If you have minor children, the Court will decide who will serve as their guardians. Further, you will forgo any estate tax planning; the Maryland Intestacy Statutes permit your estate to be taxed to the fullest extent allowed by law. Finally, you will have no ability to leave assets in trust for your spouse, children, or any other family members that you intend to support.

2. Not having a clear goal in mind.

Some people rush into crafting estate planning documents without knowing what their priorities are. For some, they may want to minimize taxes or avoid probate. Others may wish to protect their property from creditors or divorce. Maybe you want to ensure that a family member continues to qualify for Medicaid. Perhaps you want to set a plan in place for a child with special needs. Maybe you want to provide equally for all of your children. Or perhaps you want to give some of your assets away to a charity upon your death. Whatever the case may be, you need to be confident that your estate plan will thoroughly address your priorities and concerns.

3. Not understanding how assets can be distributed upon your death.

Many people assume that as long as they execute a valid Will, all of their property will be distributed appropriately upon their death. Unfortunately, that is not the case. A Will can only distribute property that is titled in your individual name. Many assets pass outside of a Will or Trust. Examples of assets that pass independently of a valid Will include those held in joint ownership, contractual relationships (such as life insurance, payable on death accounts, and retirement accounts), as well as revocable living trusts. Also, if your Will was improperly executed, your estate would be subject to the Maryland Intestacy Statutes. It is crucial to have an experienced estate planning lawyer explain how your assets can be distributed to ensure that your property goes to those you trust when you are gone.

4. Not updating Beneficiary Designation Forms.

There are certain assets that, upon your death, will pass to beneficiaries pursuant to a contractual relationship, such as an IRA, 401(k), and life insurance policies. These assets do not pass via a Will or Trust but pass according to a Beneficiary Designation Form. While many people remember to update their Wills regularly, some forget to update their beneficiary designation forms. It is imperative to update your beneficiary designations in the event you lose or gain a family member. This includes divorce, as your previous spouse may be listed as a beneficiary.

5. Not preparing a new Will after marriage.

It is important to note that marriage does not revoke a previously executed Will. If you get married after you make a Will, your spouse will not benefit from any of your assets until you create a new Will. Notably, a divorce will generally revoke all provisions of your Will as to your former spouse unless otherwise specifically provided in the Will and your divorce marital settlement agreement.

6. Not thinking about the most vulnerable in your family when creating your estate plan.

While creating a Will is vital to have control over who will inherit your property, a Will can also ensure that the most vulnerable in your family are provided for. By executing a Will, you will have control over who will serve as guardian of your minor children. You can also create trusts under a Will that can provide for children or adults with special needs so that they are not disqualified from receiving public benefits, such as Medicaid or Supplemental Security Income benefits. You can carve out contingencies to protect your family in the event of divorce or default with a creditor. You can even reduce or eliminate exposure to estate taxes with proper planning. I highly recommend consulting an experienced Estate Planning lawyer to think through how to best serve the most vulnerable in your family when you are gone.

7. Not engaging in the probate process and not timely filing important Court documents.

This point is directed explicitly towards Personal Representatives, i.e., those appointed by a decedent or a Court to settle and distribute a decedent’s estate. A Personal Representative has several duties that they must fulfill in a timely fashion. This is regardless of whether the decedent dies with or without a valid Will. Following the decedent’s death, the Personal Representative must file with the Register of Wills a Petition for Probate and include a Death Certificate and the original Will. The Register of Wills will then issue Letters of Administration, which permit the Personal Representative to access the decedent’s accounts and transfer them to intended beneficiaries. The Personal Representative is then responsible for collecting all of the decedent’s assets and titling them in the estate’s name. During this process, the Personal Representative must prepare and file an inventory and information report and an accounting of the estate with the Register of Wills. The Personal Representative will also need to file tax returns on behalf of the estate. In addition, the Personal Representative must pay any creditors who file a proper claim for an outstanding debt, as well as all taxes and costs of administration. After accounting for all of the decedent’s assets and paying all creditors, the Personal Representative is required to distribute the decedent’s assets to the beneficiaries following the decedent’s Will or applicable law. It is essential for whoever is appointed as Personal Representative to be organized, prompt, and good at meeting deadlines.

The estate planning and probate process can be challenging to navigate, especially since we do not know what the future holds. If you have questions or need legal guidance on an estate planning or probate matter, don’t hesitate to contact me today.

About Andalman & Flynn, P.C.: Founded in 1998 in downtown Silver Spring, Maryland, Andalman & Flynn has forged a distinguished reputation for legal excellence. The firm practices family law throughout Maryland and the District of Columbia, and represents individuals seeking disability benefits throughout the country. The firm focuses on cases that impact the rights of everyone, and are there for clients when responsive legal help is most critical. The firm has provided legal analysis on national and local television and radio, and their attorneys often testify before legislative bodies and are routinely invited to contribute to prominent legal publications. For more information about Andalman & Flynn, please visit the website at andalmanflynn.com or call 301.563.6685.