Top Tips For You To Avoid Mistakes

We’ve built a business based on helping people to understand that estate planning is not just about answering the question of who gets our stuff when we pass away. Rather, your estate plan should ensure that your spouse will have a house to live in and some money in the bank. You shouldn’t have to lose your savings to long term care expenses, if you get sick in your retirement years. Having seen many people make mistakes with their estate plans, I want to highlight some estate planning mistakes to avoid.

Mistake #1

The first mistake is related to planning for long term care and having a power of attorney. If you have a power of attorney document, please read it. If you are someone else’s agent under a power of attorney, look for the word “gift” in the document. Within a power of attorney document, you will find details of who the decision maker is, and what the decision maker is allowed to do. One of these, per the terms of the document, is to give gifts. If you don’t have a power of attorney document, you really need to get one, and this is something we can assist you with.

Most documents that people have printed off the internet, or have gotten from a general practice attorney, will have “limited gifting” language. This is because 20 years ago middle class Americans had federal estate tax issues. The lifetime exemption in the late 90’s, meant that you were taxed if you passed away with more than $700,000. The IRS implemented “the annual gifting exclusion”, which meant that giving away more than the annual exclusion amount, would make you liable for gift tax. 

You have a Lifetime Exemption

Fortunately, gift tax is not an issue any longer, because gift tax was combined with the federal estate tax 15 years ago. While the annual gift tax exclusion this year is $18,000, you can give away more than this amount, up to the lifetime exemption, if your documents are up to date. The lifetime exemption is almost $13.6 million, so giving away more than this amount, means that tax must be paid. Middle class Americans don’t have to worry about gift tax, because they don’t have that amount of money to give away. 

Very few people purchase Long Term Care Insurance or even consult with an elder law attorney. We hear about people having strokes or dementia, but we don’t think it can happen to us. We don’t like to think about it, and as a result we don’t have a plan in place for this eventuality. When it does happen to you or a loved one, you could find yourself in a financial crisis, paying $150,000 a year for long term care. Statistics point to one in three of us that will have dementia and need long term care. I have clients whose mom or dad is one of those 20% of people needing more than five years in a nursing home. This is unaffordable for most families, who come to see us wanting to protect assets from the harsh government rules. 

The Government Requires You to Go Broke

Medicare is not going to pay for long term care. The only government programs that will pay, require you to go broke. By doing proper planning, you don’t have to go broke while still getting the care you need. You can also save your home while leaving an inheritance to your kids. Fortunately, there are some things we can do to save money, even after their parent is already in the nursing home. This will mean getting the money out of the sick person’s name and putting it into a trust, or giving it to the healthy spouse.

If dad is in a skilled nursing facility, and he has dementia, he may not understand what’s going on. It means we have to use the power of attorney document. The authority for this was likely granted to the healthy spouse or adult child. This means money can be moved from dad’s account to the spouse and kids. 

However, if the power of attorney documents have not been updated in 25 years, there is a limited gifting provision. This means only being able to gift $18,000 a year. How will you gift the $300,000 home to your kid? The power of attorney document is meant to give us the authority to do gifting. However, if we can only gift $18,000, it means we can’t save the house.

Mistake #2

Another mistake that people make is not communicating with their decision makers. You may have an estate plan, and you’ve named your child as your decision maker. If you haven’t told him, he won’t know about your finances, or your end of life decisions. What happens if you get sick and you pass away? Your child will come to see us without a clue about what to do next. Naming your child as an executor doesn’t mean they know what it means. Our Red Wagon Club has quarterly webinars teaching the decision makers about their future roles and responsibilities. We help you explain this because if you get sick or pass away, they will be more comfortable with what needs to be done.

We Provide Free Education

If you want to have an estate plan that is not just a transaction, we’d love to work with you. We are a law firm that wants to build a relationship with you. More than just wanting to sell you some documents, we care about you. Our first step is education and we provide this in our Three Secrets Estate Planning and Elder Law Workshops. We encourage retirees and soon-to-be retirees to plan ahead for their retirement years, to alleviate being in a crisis situation. We’re going to teach you about Wills and Powers of Attorney. You will also learn what trusts are, and why you should use them. We help you to understand what the different estate planning tools are that you can consider. Visit to register for a workshop. We look forward to meeting you!