10 Common Estate Planning Mistakes
When are you going to make an estate plan? Let me guess. You call your lawyer on Monday when you’re leaving for vacation on Saturday (a trip planned months ago) and want a will before you go. Or worse, you wait until you are in hospice and decide perhaps you’d best make a will. Give yourself and your family the gift of time and due consideration. Make you estate plan now, when you are not rushed, when you are not ill, when you are not desperate.
2. Trying to take it with you.
There is no money in heaven (or the other place). It stays here. But you are empowered to determine who gets it if you choose to exercise the power.
3. Taking advice from the wrong people.
Estate planning covers many areas – wills and trusts, taxation, real estate, business law, valuation, and so on. Many financial professionals have training in estate planning and can raise issues with you, make suggestions, or point out problems. These include accountants, financial planners, brokers, insurance agents, bankers, many of whom do an excellent job. On the other hand, the law provides that only lawyers can draft wills, trusts and other estate planning documents for you. Often input is needed from all of these advisors; many estate plans are put together by a team of financial advisors and a lawyer.
4. Not telling the whole story.
Estate planning involves both taxes and personal planning for the distribution of your assets. Neither one of these tasks can be done well if the lawyer does not know what your assets and liabilities are.
If there are divorces, adopted children, children born outside of the marriage, mental illness, substance abuse – these facts can be crucial for your attorney to know. Your attorney is bound to keep all information in the strictest confidence, and it is only with full knowledge of the facts that the attorney can protect you and make sure that your intentions are carried out.
5. Not reading the drafts.
I know this may come as a shock, but lawyers make mistakes. Don’t assume that your documents say what you told the lawyer to put in there. Lawyers are people too and may have bad days. It is your responsibility to READ your will, trust, power of attorney before going to the lawyer’s office to sign them.
6. Pretending “legalese” is a foreign language.
Your documents are written in English. If you run across a word you don’t understand, the lawyer will be happy to explain it to you. Or you can look it up in the dictionary. Of course, the documents are strange to read – you don’t read wills, trusts, deeds, and contracts every day. That does not mean you can’t read them. Remember that particular words are often used because these words have been interpreted by the courts and their meaning is well-established.
7. Not wanting to pay for quality work.
Almost no client gets a plan that is “just a form”. Sure, some sections are standard, but you would be surprised at the broad diversity of estate plans. We have a saying in my office: “there is no such thing as a simple will.” The plan that disposes of a lifetime’s accumulation of assets and protects the interests of your beneficiaries, while keeping administration costs and death taxes to the minimum is a skilled piece of work.
8. Refusing to consider unpleasant possibilities.
Making an estate plan means facing up to a lot of unpleasant possibilities. The first is your own demise. Then there is the demise of your loved ones. All of the possible orders of death must be considered. Most of these contingencies are remote, but they are possibilities nevertheless. What will happen to your estate if your children predecease you? Who will hold your power of attorney if your first choice predeceases you? Many folks refuse to plan for these contingencies, saying that if it happens, then they’ll change their plan. But they may not be able to because they are incapacitated. It is far better to make a plan that covers all possibilities, however unpleasant to contemplate.
9. Not updating the plan when there are changes in the family or changes in the law.
The will you made when your first child was born is not going to be appropriate when you have grandchildren. The estate plan you made when the federal estate tax exemption was $600,000 may not be appropriate when the exemption is $5 million. The estate plan you had during your first marriage is not going to work when you are in your second marriage. Make sure your plan is up-to-date.
10. Not following through.
Did you tell the lawyer you were going to write a memorandum to put with your will detailing who would get what items of jewelry and furniture? Did you change the title to your bank and brokerage accounts as instructed? Did you change the beneficiary designations on retirement plans, IRAs and life insurance as instructed? Doing these things is just as important as having a will. Your plan may not be carried out as you intended if you don’t follow through with all of the necessary actions.