Common Avoidable Estate Planning Mistakes That Can Have Devastating Consequences!

Common Avoidable Estate Planning Mistakes That Can Have Devastating Consequences!

By Alan G. Orlowsky, J.D., C.P.A.

Frankly I am often stunned by the endless mistakes smart folks, just like you, make in planning their estates…or failing to plan, as the case may be. As Charlie Brown would say, “good grief!” Imagine if you will, a young woman comes into your office, hysterical, irrational and crying and explains to you that her husband suddenly died. Adding to the hysteria is that he had no will, trust or life insurance and left a large home payment along with three young children and insufficient funds to support them. What would you say to her? Well, this situation has occurred in my office and, frankly, there really wasn’t much to say to console her. Once you have passed your family can’t go backwards…..it is tantamount to re-arranging the deck chairs on the Titanic. Indeed, this was a sad state of affairs and a complete failure to plan by her husband.

As an attorney practicing in the area of Estate Planning and probate I am regularly interviewed by and interview couples and individuals to see if we are a good fit for each other for an estate planning engagement. During this interview process I learn about the omissions, mistakes and the weaknesses in their planning. Often there is no planning at all. Outright catastrophes like the above occur all the time. Other common and potential catastrophes in the making I see are as follows:

MISTAKE #1: The Ill-Founded Belief That You Are All Taken Care Of:
This is the biggest mistake of all. Due to inadequate, poor or no information individuals develop a false sense of security that they are all taken care of. Nine times out of ten they are not!

MISTAKE #2: Insufficient Life Insurance Planning:
Statistics show that 80% of all individuals have inadequate life insurance coverage. With the myriad of new and cheap products there little excuse for not having this protection for your family. Moreover, repeatedly beneficiary designations are incorrect…when your children are infants or toddlers they should not be named as contingent beneficiaries…a well designed trust solves this problem.

MISTAKE #3: Incomplete or Absolutely No Funding of Trusts:
This omission occurs in 90% of all Estate Plans. If your Revocable Trust or Insurance Trust is not properly funded, and your beneficiary or designations not properly stated the plan you have will fail as contemplated!

MISTAKE #4: No Business Liability or Asset Protection:
As we have just learned it is a risky world. Risk is everywhere, especially in a suit happy culture. However, as part of your estate planning you can reduce your risk and better protect what you have earned and saved. If you own a business it is critical to have the proper corporate planning and documentation in place as well as the related estate planning that goes with it!

MISTAKE #5: Failure to Plan for End of Life Costs:
Nursing care costs and the related monetary issues are huge concerns, but few adequately think through these end of life issues. There are strategies that can be employed to provide for these costs and mitigate the consequences of a long-term end of life illness.

The above 5 mistakes are only a spattering of the planning mistakes I see. There are many others involving children, marriage, divorce, special needs, etc. As such, if you believe you need to review or plan your estate, please contact me as soon as possible for a complimentary consultation.

About the Author

Alan G. Orlowsky, President of Orlowsky & Wilson, Ltd. in Lincolnshire, Illinois, has been counseling people on estate planning for 28 years. He previously worked for the IRS in its Estate and Gift Tax Division. He also worked for the Deloitte & Touche accounting firm, and he has taught taxation and accounting at Loyola University of Chicago, School of Business.

Al is a contributing author of the book 21st Century Wealth (Esperti Peterson Institute, Denver, 2000), and has written numerous articles on the subject of estate planning. Contact Alan Orlowsky by email or call 847-325-5559.

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