1.) Not protecting a child or other beneficiary’s inheritance.

Many people don’t realize that you can add asset protection to the inheritance that you leave to your child or other beneficiary. The way to do this is to have either a beneficiary-controlled trust that springs from your revocable trust or a continuing trust that is managed by a separate Trustee. There should be no beneficiary demand rights in the trust. If you want a beneficiary-controlled trust in which your child may act as Trustee at a stated age, he or she would need to resign as Trustee if they were ever faced with a divorcing spouse, bankruptcy, creditor issue or lawsuit. If you have an Independent Trustee in place, instead of your child at a stated age, there’s no need for your Trustee to resign if one of these bad situations happens.

2.) Not having an Expanded Durable Power of Attorney for finances.

One mistake I often see when I review estate plans is that the client only has a Statutory Form Power of Attorney. The Statutory Form Power of Attorney is helpful when dealing with banks and financial institutions in California because they are usually very familiar with them and less likely to reject them. However, they are not all inclusive in what they cover. We recommend that an Expanded Durable Power of Attorney be a part of your plan in addition to your Statutory Form Power of Attorney to cover many unknown situations to help your family have more planning options if you were to ever become incapacitated. The Expanded Durable Power of Attorney can be drafted to cover such things as disclaimers, the funding of a revocable or irrevocable trust, the creation of an irrevocable trust, gifting powers, application for Medicaid and/or other government benefits, dealing with online passwords and digital assets, and much more. These are all just some of the examples of powers that your family might need down the road if you ever lacked capacity.

3.) Underfunding or a lack of trust funding.

One of the biggest mistakes we commonly see in estate plans is when the trust either doesn’t own all of the assets or doesn’t own any of the assets of the Grantor of the trust. Having a trust is a great thing, but it only works if the assets are transferred into the trust. If you died and the assets were not funded in proper trust title, there’s a likelihood that your estate would go through probate. The reason probate is so bad in California is that it’s expensive, time-consuming, and it opens up your estate to public view – including all of the names and addresses of your beneficiaries as well as your executor. Not to mention that you went to the trouble to put together a solid trust and now the thing will not work because it has no gas (no assets).

4.) Failure to plan for larger retirement accounts.

In most circumstances, if you have a collective value of $200,000 to $300,000 or more in retirement funds, you should be looking at how you’re going to pass those funds to your children in the most tax-efficient and advantaged way as well as providing them asset-protection. There are three main factors to consider. First, the stretch out. Most beneficiaries do not realize that they can stretch these accounts after they inherit them. This means that they do not have to take the entire account in one lump sum distribution. They can stretch the account out over their life expectancy which typically amounts to the account growing in value 5-10 times what it was when they initially inherited it. The second factor is asset protection of the account from a child’s future bankruptcy, divorcing spouse, a creditor or lawsuit. And the third is better control of the downstream beneficiaries. What that means is who would inherit the account after your child passes. Retirement Protector Trusts are a huge planning advantage in an estate planning that most people are unaware of.

5.) Not including a HIPAA Authorization for Release of Medical Information in your estate plan.

A HIPAA Authorization controls who can have access to information that you are at the hospital or gain access to your medical records in order to make the decisions about your health care if you’re unable to do so yourself.


Call Lisa at (760) 448-2220 to schedule your appointment with Brenda Geiger or Patrick Sebastian today. Lisa may also be reached at [email protected]