Mistakes happen. If you’re lucky, most of your mistakes will have minor consequences. Making a wrong turn adds 15 minutes to your trip. Forgetting to return a shirt that doesn’t fit means you’re stuck with it, and out $50. But estate planning mistakes are rarely minor or cheap, and their consequences can sometimes affect your quality of life during your final years. These are some of the common mistakes I urge you to avoid if you want to protect your own future and those of the people you love most.
Failing to Consider MassHealth
In Massachusetts, the Medicaid program is called MassHealth. The MassHealth program can cover costs of nursing care in a long term facility. Many residents will someday rely on MassHealth for long-term care. The program can provide in-home care services and/or nursing-home care for seniors and people with disabilities. Residency in a nursing home can cost more than $10,000 per month, and few families can afford to pay out of pocket. MassHealth will cover this care for eligible Massachusetts residents.
Because long-term care is so expensive, MassHealth will only accept applicants who can prove they can’t afford their own services. The program’s eligibility requirements are stringent and strictly enforced. An applicant may only have very limited assets, but they can’t give away money or property at the last minute; MassHealth examines applicants’ financial records going back five years.
The possibility that you’ll someday need MassHealth coverage should be part of your estate planning process. There are steps you can take that may protect some assets for your heirs, without running afoul of the MassHealth eligibility rules. The goal is to make sure you can get any services you need without losing everything you’ve earned.
Failing to Fund Revocable Trusts
Creating a revocable trust is step one in a two-step process. Funding the trust is step two. Failing to fund a revocable trust is like opening a bank account but leaving it with a zero balance.
Funding a trust means transferring assets to it so they’re no longer under your control. How this happens depends on the assets you’re working with. Generally, funding a revocable trust involves changing property titles and beneficiary designations on accounts. As an estate planning attorney, I can offer a client specific guidance about funding a revocable trust, but following through on these tasks is up to them.
Letting Plans Become Obsolete
Estate planning is an ongoing process. Your estate plans are a reflection of your priorities and financial circumstances; as they evolve, naturally your estate plans should evolve too. Typically, I advise clients to review their estate plans after any major life change (marriage, divorce, birth of a child, etc.), or when anyone named in the estate plans dies or becomes incapacitated.
In the absence of those events, I recommend reviewing your estate plans every three or four years. Perhaps nothing will need to be updated, and the process will be quick and easy. We offer annual reviews to our clients.
Ignoring Estate Tax Liability
Estate planning in Massachusetts includes a wrinkle that residents in most other states don’t have to think about. The federal estate tax is so high ($11.58 million per person, as of 2020) that it’s irrelevant for many families. Only a small percentage of Americans die with estates worth enough to owe federal estate taxes.
But states may also levy their own estate taxes, which Massachusetts does. Massachusetts has the lowest estate tax threshold in the country. Estates valued at more than $1 million will be taxed upon the owner’s death.
That low threshold means that many Massachusetts homeowners’ estates will ultimately owe estate taxes. And, unlike the federal estate tax, the Massachusetts estate tax applies to the entire estate value, not just the amount exceeding the threshold. If it’s possible that your estate will be valued at more than $1M, savvy estate planning could potentially save you tens of thousands of dollars for your heirs that would otherwise go to taxes.
Letting Your Loved Ones Divide Up Assets
Grief does strange things to families. Relationships between loved ones have been permanently destroyed by fights over inheritances. Say Mom always told one child that they would inherit her wedding ring, but doesn’t specify that in her estate plans. Another child has possession of the ring and wants to keep it. Thus begins an argument that will probably end with both sides hurt and angry.
These are the kinds of emotional issues that can come up during the settling of an estate. If you feel strongly about leaving specific assets to specific people, that’s something to discuss with your estate planning attorney. I can help you determine the most appropriate, tax-advantaged way to make these transfers, allowing you to maintain control over how your belongings are distributed.
The biggest mistake you can make is to do nothing. The only way to ensure your wishes are carried out is to complete your estate planning. There are a million excuses for putting it off–Not having the time, concerns about the cost, and knowing you’ll have to make difficult decisions, among others. If this sounds familiar, our Wills in a Week program may be right for you. Once a month, we offer reduced cost estate planning in a low stress, group setting.
I’ve seen firsthand how devastating the consequences of these mistakes can be. It’s just not worth taking risks with your estate planning process. At Ladimer Law, we’ll help you anticipate your future needs and customize your estate plans to meet them. Contact me today!
Julie Ladimer is the award-winning founder of Ladimer Law. She has been helping people complete their estate planning since 2014.
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Ladimer Law specializes in estate planning. We protect our clients, their heirs, and their assets by listening closely, knowing the law, and executing estate plans that fit and evolve.