Elder-law attorneys here say people make avoidable, but all-too-common mistakes in planning their estates.


Asked how frequently such problems and pitfalls crop up, Spokane attorney Karen Sayre gives a succinct answer.


Im thinking about the people Ive seen just in the last couple of days, she says.


One of the biggest, and most easily avoided, potential mistakes a person can make is to name another individual as a joint owner of their financial accounts instead of filing a durable power of attorney, which can limit the power of someone whose help is sought, Sayre says.


For example, a woman who has four children, only one of whom lives nearby, might find it convenient to add the child whos geographically close as a joint holder of her bank account so that child can pay her bills or do her shopping easily. Though the woman might have a will that says the balance of an account is to be divided equally among the four siblings after her death, ownership of the account will take priority over the will, Sayre says. So, when the parent dies, the child who has been named as a joint owner becomes the sole owner of the bank account, and its left to that childs discretion whether to disburse the funds equally among all of the siblings.


Another problem with naming a joint owner of an account is that if the joint owner has financial problems, creditors can claim the money in the account to recover debts owed by the joint owner.


Sayre says people frequently make the mistake of naming joint account owners because they lack information.


They dont understand the effect of doing it, Sayre says. Nobody at the bank says to them, This is whats happening.


Scott Miller, another elder-law attorney here, says the durable power of attorney is a critical document for these reasons, and preparing one in case an estate owner becomes incapacitated can save the estate money since it prevents the need for a court-appointed guardian to be named to make decisions.


A durable power of attorney is a legal document through which one person gives another authorization to act on his or her behalf in legal and financial matters without transferring ownership of assets, Sayre says. A power of attorney can be as broad or as narrow as a person wants, Sayre says, and can be made effective immediately or with conditions, such as when a person becomes disabled or otherwise incapacitated.


The alternative is a guardianship, which can cost several thousand dollars, Miller says, as opposed to a durable power of attorney, which can be prepared as part of a package of estate planning documents that together can cost between $500 and $1,500, depending on the complexity of the clients estate.


Miller says married couples often mistakenly assume that they dont need a durable power of attorney for each other, but for any individual accounts, a durable power of attorney is important to have.


Another potential problem occurs when an estate owner names two siblings who dont get along to be co-representatives of a will, Sayre says. She says clients often do that to keep siblings on equal footing and out of a mistaken belief that a parents death will bring them together.


This approach usually backfires, costing a lot of money and time in probate, and certainly not mending rifts between siblings as the parent intended, she says.


Miller says elderly people also frequently sets up a living trust to avoid having their estate go through probate, but sometimes dont put all their assets in the trust, defeating the purpose of the trust and resulting in their estate going through probate anyway.


Living trusts are not always the perfect solution, Sayre says.


There is nothing that is perfect for everyone, she says. There are many assets that pass outside of probate, including insurance benefits and bank accounts that have named recipients, she says.


Miller and Sayre each say that having prepared a community property agreement can be a good way to help a surviving spouse avoid probate, but that might not always be the best method to settle the affairs of the deceased.


A community property agreement must be prepared ahead of time and signed by both spouses, but isnt recorded until after one spouse dies. When a spouse dies, it can be filed with the county auditor, and the couples property then can be transferred seamlessly from one spouse to the other.


If a spouse is faced with a long illness, however, their mate might need to be able to revoke a community property agreement, shift ownership of assets, and write a will that would set up a special needs trust to help care for a spouse who needs long-term care, in case the healthy spouse dies first. A similar trust can be established to care for a disabled adult child, Sayre says. If a disabled or ill beneficiary inherits assets from an estate outright, the inheritance can make him or her ineligible for Medicaid benefits, Sayre says.


Also, Miller says it might be preferable to go through probate in some cases because creditors, such as hospitals, can be notified directly or via legal notice of probate and must come forward with their bills quickly after a patients death, which helps a surviving spouse settle financial obligations of their spouses estate.


Sayre says that in such cases probate can be finalized in about six months. If an estate is worth more than $2 million, however, she says it can take about 18 months to complete the process due to tax filing requirements.


Although do-it-yourself legal documents can be downloaded from the Internet or purchased from stores, Miller asserts that filling them out without professional advice can result in problems. For example, he says, important related documents, such as Health Insurance Portability and Accountability Act waivers for medical information, are frequently left out of such downloaded forms, and other aspects of the law might not be covered in such standardized forms.


Another potential problem is that sometimes people follow family tradition, creating unintended tax obligations in the process.


Miller recalls a client who wanted to keep his son from having to go through probate to inherit his property. He did as his own father had done, deeding land to his son while he was still alive, Miller says. Yet, because the property was deeded to the son rather than left to him through an inheritance, the tax basis for the property remained what the sons grandfather paid for it decades earlierin this case, $10. If the heir later sold the land, which already is worth $400,000, he would be faced with a substantial capital gains tax obligation that could have been avoided if the property had been willed to him as part of his fathers estate, Miller says.


It would have been better to pay a few thousand dollars in the probate process, Miller says. People think, This is what my father did for me, so this is what Im going to do for my son. Miller says he sees the same set of circumstances play out over and over.


Rich Gilleran, a Spokane attorney who works frequently with Medicaid clients, says that getting advice is important, since there are certain times when an heir might benefit if property were deeded to them. Such a transfer can be used to protect a clients assets, and the benefits and drawbacks must be weighed depending on the individuals circumstances.


Sayre says that over time, people can adjust their estate planning, and by the end of their life the need for probate might fade as they liquidate assets to fund retirement. For example, she says, a woman might sell her house to pay her expenses in a retirement home, and have really only her bank account, which can be designated to a recipient at death, and a few possessions left at the time she dies, eliminating the need for probate.


You always want to have a will in case you need it, but as time goes on, there may be less of a need for it, she says.


Miller says that sometimes, as in the case of a second-generation inheritance of family land, probate shouldnt necessarily be avoided, and he and Sayre both say that Washington states probate process is fairly easy to navigate, compared with other states laws.


Washington is lucky; we have a wonderful, efficient probate process, Sayre says.


Contact Jeanne Gustafson at (509) 344-1264 or via e-mail at jeanneg@spokanejournal.com.