Be aware of estate planning mistakes

One new year's resolution we should all make and keep is to make an estate plan that will save money, time and tears for our heirs when we are gone.

It's not easy to do, as I've been finding out.

For the past few months I've been attending estate-planning seminars. I learned some worthwhile nuggets at each one. I always walk away with more questions that need answers, but I have vowed to avoid as many mistakes as I can.

As promised, I'm sharing some of what I learned with you.

In one seminar financial guru Christine Haas mentioned a common mistake people make is not to have a beneficiary listed for all assets.

She told the story of one woman who was careful to leave behind detailed directions with her will. She tried her best to think of everything in doing her estate plan to spare her children unnecessary problems and legal expense.

But when she transferred her main brokerage account to another place that offered a higher rate of return, she forgot to complete a new beneficiary form. That meant her children are now involved in a long probate process that could have been avoided.

Estate planning experts say we should make a copy of every beneficiary form and every transfer on death agreement, keeping those forms with our other estate documents.

As I listened to that advice I was absolutely positive I had listed beneficiaries on all my accounts. Much to my surprise, when I requested copies for the forms, I learned one brokerage account with Merrill Lynch had no beneficiary.

Impossible, I thought. I remembered completing the form and having it notarized before I mailed it in.

But when I completed the form, I had one extra digit on my daughter's Social Security number so the brokerage firm disregarded it without notifying me. Had I died without knowing that, my daughters would be drawn into the long probate process I tried to avoid.

When I published my first column on estate planning, I heard from six people who also were shocked to learn they had listed no beneficiaries on accounts.

"It's a simple mistake a lot of people make," says the estate-planning expert.

"Get your estate plan reviewed to make sure it says what you want it to say. Some lawyers and bank trustees will review wills and other documents for free," she adds.

"In at least 70 percent of the time, when I review wills and documents I find major problems that would have tied up an estate with unnecessary legal problems," she says.

As one case in point, she told about one woman who thought she had everything in order with a will that said her $3 million estate was to be divided equally among her three daughters.

While the will said that, her bank and brokerage accounts listed only one daughter as her beneficiary.

"She thought that daughter was legally bound to divide everything equally with her sisters because that's what the will said. But a beneficiary designation supersedes a will," explained Christine.

She stresses that how accounts are titled is extremely important.

One man left behind a will directing that all his assets be divided among his two sons and his second wife. It didn't happen that way. Because of how his accounts were titled, his second wife got all his money while his sons got nothing.

The estate lawyer told the wife what she did was "legal but not ethical" in that she didn't follow the terms of the will.

Because of issues like that, some estates get tied up for years. "In the long run, the only one who benefits are the lawyers," one estate lawyer told me.

Experts tell us another estate planning mistake is not to review your will, beneficiary designations and documents whenever a life-changing event occurs.

"Get your estate plan updated every time you have a life-changing event marriage, divorce or the birth of a child," said Christine Haas.

Oh, boy, we all know horror stories that happened because that advice wasn't followed. I know at least three different instances where a first wife inherited all her ex-husband's assets because he never got around to changing titles and his will. In one case, the man was a lawyer married to someone else for 11 years.

Another common mistake, experts say, is designating beneficiaries for all our accounts but leaving no money to fund the estate while it is being settled. Who will pay for house expenses while the house is waiting to be sold?

Even celebrities and those surrounded by legal experts can create problems for heirs by not updating wills, Christine points out.

Former Supreme Court Justice Warren Burger created his own will but he left out key provisions, and his family paid the price close to $450,000 in unnecessary taxes and legal fees.

"Self-drafted documents often can result in unnecessary costs and problems," says Christine. "It's best to get everything reviewed by a lawyer."

I'm not a lawyer and I might not know much. But one thing I do know: Estate planning is a complicated process. The more I learn, the more I realize I have a lot more to learn.

I also know this: This is one time when it pays to have legal advice to do it right.