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Law Offices of Ronald W. Rutz
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April 12, 2003: Common Estate Planning Pitfalls: Part 2

Q: I was asked about the most common estate planning pitfalls and in last month's column began listing the many errors that occur. This month's column is a continuation of some of those concerns.

A: Last month the following pitfalls were discussed. Doing one's own documents without even professional review of the Will, Trust, or Durable Power of Attorney is a blueprint for possible disaster. Yes, some people get it right. But a lot of business has been generated for me by those who do it wrong and then the estate ends up paying much more than if a few hundred dollars had been spent initially.

People also go to extremes and either try to get by through "discount" legal services, organizations, or lawyers, or end up spending thousands of dollars on complicated, expensive "plans" that no one understands except for the person setting it up. Remember you get what you pay for but you do not have to pay through the nose and increase the estate of the estate professional.

Durable Powers of Attorney (DPOAs) are a simple and inexpensive way, even for people with living trusts, to cover personal and elder law issues and do basic estate planning. Without DPOAs and even if everything is in a trust or titled in joint tenancy, if something happens and a person is unable to act on his or her own behalf, not all necessary power may be available. The only alternative is a very expensive, intrusive, all-controlling conservatorship administered by the Court and normally a stranger titled "conservator."

The fear of "probate" has probably caused more expense and disruption in people's lives than any other single area. Remember that normally the court procedures using unsupervised administration will cost between $1800 to $2500 with an attorney and a few hundred dollars without one. Yet people will "give" away property, paint themselves into legal corners through joint ownership, or create a whole new legal and personal overlay through trusts just to avoid probate.

The minimization of settlement costs and elimination of taxes are not "problems" with just a minimum of estate planning. Yet people try to give away assets or put everything into joint tenancy to simplify things. People who have been independent all of their lives suddenly make themselves helpless and dependent. Remember, not every one of your children or your in-laws recalls whose assets those were (are) and may not possess the same degree of commitment to act as the financial safety net for the giver. Once an asset is given (such as adding a name to a title), the receiver normally cannot be forced to act in the best interest of the giver.

People turn their backs on lifetime trusted legal and accounting advisors and go to seminars, often put on by out-of-town "experts," including lawyers, and are persuaded to replace documents and try the suggested approaches of the presenter. Before you commit to pay and to adopt the plan being touted, have the proposal reviewed by your lawyer, CPA, financial advisor, or even your bank. If the "promoter's" ideas are that good and he or she does not have an unarticulated, hidden agenda, there should be no objection by the speaker to let your lawyer, CPA, or financial advisor have some input before it is too late.

Subsequent columns will revisit specific areas such as gifting, holding property in joint tenancy or designating payable-on-death beneficiaries, advantages and disadvantages of living trusts, what is a Colorado probate anyway, and the need for tax planning even if your net worth is under $1,000,000, etc.

Thus, for those of you wanting something in writing as a composite overview and as reference material for estate planning Colorado, you might want to save upcoming columns.

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