by Archie M. Richards, Jr.
October 22, 2007

Here are 8 ways to make your property's inheritance hard for your heirs.

1. Failure to Leave a Will: Without a will, your property passes according to the dictates of the state legislature. This may not suit you, especially if you have young children. At the very least, use a consumer software program that offers will kits conforming to the legal language of your state.

2. No Plan for Incapacity: An 80-year-old grandmother sinks into dementia. A car accident puts a 30-year-old father into a long coma. These unfortunates can no longer sign documents. Their property becomes subject to the jurisdiction of a stranger - the Probate Court Judge. In event of your disability, give someone you trust the power to manage your property. It's called a power of attorney (although the person doesn't have to be an attorney).

   But there's a problem: Some financial institutions won't accept powers of attorney created more than six months before. You're unlikely to renew a power of attorney this frequently. For a better solution, ask an estate planning attorney to draft a living trust for you. (The cost is probably $1,500 to $3,000.) The ownership of all your property is changed from your name to the trust's name. As the sole trustee, you can do with the property whatever you like.

   But if you become disabled, a person named in your trust steps in as successor trustee to manage the property on your behalf and for your benefit. All financial institutions accept this, no matter when the trust was written.

   You should also draft a healthcare directive, giving someone the right to make healthcare decisions for you. You can specify your preferences for life support and other treatment options.

3. Reliance on Joint-Name Ownership: Holding property in joint name can lead to serious problems. If one party becomes disabled, for example, the competent party can't control the property until the probate judge authorizes it. Far better to hold the property in trust.

4. Failure to coordinate or update beneficiaries: Many people think the inheritance of IRAs, retirement accounts, life insurance policies, and annuities is controlled by the person's will. Not so. The assets pass to the persons named in the plans or policies themselves.

   When you signed up to participate in your company's 401(k) plan, you probably designated a beneficiary to inherit when you die - your spouse, for example. Then you forgot about it.

   Things change. You acquire a new spouse, for example - it's been known to happen. Whoops, at your death, the 401(k) plan goes to the former spouse, causing big problems. Review your beneficiary designations every few years. It's really important.

5. Failure to inventory: If you die or become disabled, your caretaker or your heirs may have a hard time determining what you own. Where are your key documents? Who owns what? Severe tax and other problems may result if the answers to these questions aren't found. Keep good records in an easy-to-find location. If you have a living trust, put everything you own into the trust's name.

6. No attention to special situations: We're talking people problems, here. If both parents die, who will take care of the minor children? Do you want the probate judge to decide, or would you prefer to choose someone yourself? For an adult child with a disability, investigate a Special Needs Trust. Should Fido be cared for by someone you know, or just packed off to the dog pound? All these wishes are unique to you. They should be part of the estate planning process.

7. Failure to update: A marriage, divorce, change of residence, or any major life transition provides an occasion to review an estate plan.

8. Failure to Use a Professional: Planning your inheritance is no easy task. Turn to a financial adviser - better yet, an estate planning attorney. Without proper planning, your property can pass to the wrong people in the wrong manner at the wrong time.

Estate planning is about the people you love. Make it easy for them.