The 3 Most Common Mistakes People Make When Planning Their Estates

The 3 Most Common Mistakes People Make When Planning Their Estates

4 min read
Scott Smith

Scott Royal Smith is an asset protection attorney and long-time real estate investor. His law firm, Royal Legal Solutions, helps thousands of real estate investors and entrepreneurs in all 50 states protect more than $1.2 billion in assets. Since 2014, he has published over 1,000 posts and articles on BiggerPockets and has appeared on hundreds of podcasts.

Scott fell in love with real estate when his commercial property investment allowed him to graduate from Albany Law School debt-free. He immediately began practicing at the trial and appellate court with the district attorney, placing him in the top 1 percent of lawsuit attorneys in the county in terms of professional experiences. He also worked in private practice, suing insurance companies for denying valid claims (which is surprisingly common!).

After his friend lost $3 million in real estate from a single lawsuit, despite having ample insurance, Scott dedicated himself to educating real estate investors on the importance of affordable asset protection, specifically when it comes to folk knowledge and misconceptions that still exist in the investment and legal community. The solutions Scott recommends for his clients are the same ones he originally created for himself and has been refining on his mission to help people protect themselves from frivolous lawsuits.

Follow Scott as he deconstructs the litigation game and shows you how to free your time, protect your assets, and create wealth that lasts for generations.

Scott regularly appears on shows with folks like Grant Cardone, BiggerPockets, Entrepreneurs on Fire, Wheelbarrow Profits, and his own real estate investing podcast. He frequently interviews industry experts on his Facebook and YouTube accounts and has published thousands of posts and articles on BiggerPockets and his blog for real estate investors.

Scott graduated from Albany Law in 2014.

He has passed both the Texas and New York bar exams.

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This article does not constitute legal advice. We recommend you seek the counsel of an attorney familiar with your specific situation and market to ensure you make the best decisions within your real estate business.

Ever since the Internet came along, every self-proclaimed genius in the world is learning how to “do-it-yourself.” Of course, there are some smart people, like yourself, who are learning to D.I.Y. all sorts of nifty things. We’re assuming you’re smart because you’re reading this: Idiots wouldn’t get past the title, because typically, idiots don’t acknowledge the fact that they can make mistakes at all.

But nevertheless, the mass availability of all sorts of information has convinced most folks they can do anything they please with some knowledge and a little bit of elbow grease. People are making their own decorative flower pots out of fishing twine and tuna cans. They are building bunkers to survive the inevitable collapse of our unsustainable civilization. Women (and some rather fierce drag queens) are learning to contour their faces with makeup to look like any number of tabloid celebrities, whose initials may or may not be KKW. Some are even learning to DIY legal or financial matters, whether they are feeling empowered by newfound knowledge of TurboTax or believe they’ve learned everything they need to know from clicking around on legal dictionary websites for a few hours. And, of course, they are planning their own estates.

Related: 5 Reasons Real Estate Is the Perfect Early Retirement Tool

If you have the time, savvy, and acumen to plan your own estate, you’ll save thousands of dollars. That means another pallet of tuna for your bunker, which is soon to be decorated in lovely flower pots that reflect your perfectly sculpted and highlighted cheekbones. Of course, there won’t be any flowers because there is no natural light in the bunker, but never underestimate the beauty of imagination. You may look like an extra from The Walking Dead from all that contouring in the dark too, but if you think you’re smokin’ hot, you do you, baby.

However, the power of imagination alone does not make you an attorney. We aren’t telling you this to put you down or make you think you can’t assist in forming your own estate plan. Hell, we’re not even telling you this because we busted our asses and sunk tens of thousands of dollars into law school to gain expertise in these matters. My firm has nothing to gain from you, because I’m not your lawyer. Again, you can do you. In fact, as lawyers, we like well-informed clients who take the initiative to even think about matters like estate planning. That’s why this little ditty exists: we want to help you to help yourself.

Of course, you can learn to plan your own estate. But like anything finance driven, it’s more confusing than a Matrix sequel, and you’ve got way more choices than just whether to take the red pill or the blue pill.

So let’s just begin by learning what not to do. Here are the three most common mistakes people make when planning their estates.

1. Improper Signatures and Witnesses

If you live in a cottage that is illuminated by whale oil, you might be the kind of person who has a handwritten will. If you are reading this, you live in (at least) the 21st century, so you’ve probably written your will on something called a computer, or perhaps a tablet if you have young, nimble fingers. It probably looked similar to the device you are reading this on, or watched the aforementioned flower pot, apocalypse preparation, or contouring videos on. Welcome to the future.

If your will is not handwritten, you need two witnesses to sign it. Failure to adhere to signature and witness requirements invalidates the entire will. Unless you want to tear your family apart while they argue over how to divide up all of your precious whale oil/quills/makeup pallets, you should find some witnesses and get some signatures.

This may sound a little obvious, but remember: You are not a witness. Find two people that aren’t you to get the job done right.

2. Failure to Fund

People like trusts. They can dole out cash to beneficiaries as Gods unto us mortals. If you have a trust and fund a trust, you may not fund it with assets from the trust. This isn’t exactly trustworthy. Funding a trust means that you put the assets you want to be controlled by the trust in the name of the trust.

Let’s say you want to put your house into a trust with a board of trustees. In addition to making those trustees feel important with their fancy new position on a board, you are also giving those trustees complete control over that asset. You are taking it out of your name and placing its ownership and operation in the trust’s name. If the property is not deeded to the trust, your heirs will need to get a judge to transfer the title. Stock, LLC ownership, insurance, investments, and bank accounts should be placed in the trust’s name or the trust should be listed as the beneficiary if you want to save your family a day in probate court. Probate court is a drag for everyone, except the attorneys getting paid to be there.


Related: How to Effectively Conduct Joint Venture Agreements as a Real Estate Investor

3. Failure to Fully Consider Your Circumstances: Your Situation Might be Unique

Most families have at least one kid who just can’t keep any money in his pockets. Some may have more debts than assets. You might have assets in multiple states or a blood-sucking ex-partner who took the kids and takes all your money. The point is that standardized forms do not cover every case. These unique situations are rarely handled properly when people do their own estate plans. Don’t make this costly mistake. Account for any anomalies in your family or finances.

You can save a lot of money by planning your own estate, but it is advisable to have a pro look it over. You’re working hard to save money. So invest a little bit to ensure it goes to your chosen heirs in a timely manner. Get a qualified estate planning attorney’s help to avoid adding probate court and delay or loss of assets to your loved ones’ grieving process.

Any questions? Common mistakes you’d add to this list?

Leave your opinion below!