Santa Clarita elder law attorney Randall Kaiden of Kaiden Elder Law Group, PC recently highlighted the most detrimental mistakes that could impact an individual’s estate planning on KHTS AM-1220’s “The Senior Hour.”
The top three mistakes, according to Mr. Kaiden, include:
Married couples failing to update AB-type trusts
Seniors failing to create a Life Care Plan which is incorporated into their estate planning
And worst of all, not seeking the advice and services of an experienced elder law attorney who only specializes in estate planning and elder care law.
“Back in the 1990’s and 2000’s, married couples commonly created what’s known as AB or ABC trusts,” Mr. Kaiden explained.
“They did that because death taxes were so high, and each spouse in the past could get a large tax exclusion if an AB or ABC trust was utilized.”
Prior to 2012, an AB or ABC-type trust ensured that not only would no taxes be due after the death of the first spouse, but at the death of the surviving spouse, death taxes could also be limited or totally eliminated.
If a “simple” trust were used instead, Mr. Kaiden pointed out, that an unnecessary amount of estate taxes would likely have needed to be paid by loved ones, after both spouses passed away.
“But, these days we have a new tax act which allows a married couple, essentially, to transfer $11 million to their beneficiaries without having to face any transfer taxes,” said Mr. Kaiden.
In the past, couples who created estate plans with tax avoidance in mind should now consult with an elder law attorney to update their estate planning in order to simplify their lives.
That is, after 2012, it became clear that it makes much more sense for couples with less than $11 million (or a single individual with less than $5.5 million) to create a simple trust and avoid costly trust administration as well as yearly trust tax returns.
The second largest mistake seniors make is that they do not incorporate life care planning into their estate planning.
A life care plan helps seniors properly solve the complicated issues that seniors face, including those surrounding health care, housing, finances, and, of course, legal issues, according to Mr. Kaiden.
“Most estate plans only address what happens when a person dies,” Mr. Kaiden explained.
“But it’s far more important that adequate solutions to the problems aging causes seniors are found far in advance of an emergency, so that seniors can live the life that they want to live.”
In other words, seniors should be planning for what happens if they live, rather than only planning for what happens when they die, said Mr. Kaiden.
But the biggest mistake Mr. Kaiden highlighted is that people oftentimes hire attorneys who do not truly specialize in estate planning and elder care law.
“What I’ve started to see in the last five or ten years is that if a trust was done by an attorney that was a jack-of-all-trades, many people would’ve been better off either doing nothing or even going to a legal document provider such as Legalzoom,” said Mr. Kaiden.
Unfortunately, Mr. Kaiden has found that trusts which were drafted by generalists oftentimes contain many mistakes, which clearly is detrimental to seniors and their families.
As a Santa Clarita elder law attorney, Mr. Kaiden creates life care plans which can help ensure that seniors live the life that they want to live, instead of one which is being thrust upon them because of health care and long term care issues.
Posted by: The Trust Advisor