Making mistakes in your estate planning can torpedo your efforts to protect your family after you die, warns a recent article from Kiplinger, “Common Estate Planning Mistakes.” Everyone benefits from a professionally-made comprehensive estate plan, a process for preparing your legal and financial affairs so assets and possessions are passed on after your death to the people or charities you want.
Not having an estate plan can create trouble for those you love. The biggest estate planning mistake of all is not having an estate plan. After that, there are several others.
Procrastination. Suppose you unexpectedly become incapacitated and don’t have an estate plan. In that case, your family will be left guessing what you would want your medical care to be. They may have to go to court to apply for guardianship so they can pay your bills and keep your household running. Everyone should have documents like a Medical Power of Attorney, a Statutory Durable Power of Attorney (for handing financial matters), a HIPAA Release Form and a Directive to Physicians (Living Will) in place so that you can be taken care of in accordance with your wishes during your incapacity.
Trying to make an estate plan on your own. Unless you’re an experienced estate planning attorney, there’s a lot you could leave out if you attempt a DIY estate plan. If there are serious enough errors, a court could declare your will invalid and it’s as if you never had a will in the first place. The laws of Texas (or the state in which you live) will be used to distribute your assets. It may not be what you had in mind.
Keeping estate planning documents in a safe or safe deposit box. Documents need to be where someone can get them in an emergency or after your passing. Safety deposit boxes often require a court order to be opened on the death of the owner. Make sure that a person you trust (preferably the one you named in your estate planning documents to handle things for you in the event of death or incapacity) knows where these documents are located.
Missing key documents. Make sure your estate plan includes these documents:
- Living Trust or Will —This document outlines your final wishes and instructions for distributing your assets and how you want your affairs managed after you die. If you decide on a living trust, you will also need a “pourover will” to transfer assets to your trust at death if you did not take care of this during your lifetime. The Living Trust or Will also names a trustee or an executor to oversee the instructions you leave in the in the document.
- Beneficiary designations—Any account allowing for beneficiaries, including IRAs, pension plans, investment accounts and insurance policies, will pass directly to named beneficiaries. Be sure that these are up to date.
- Medical Power of Attorney —Allows another person to make medical decisions for you if you become incapacitated.
- Funeral instructions—Do you want a traditional burial? Cremation? Leave written instructions for your family outlining your wishes for a funeral or memorial service.
Not Providing for Digital assets. These include websites, cloud storage, social media accounts and cryptocurrency, to name a few. By assigning a digital fiduciary and sharing key information, you help heirs locate assets and avoid identity theft.
Failing to update your plan. Life happens and things change. Someone you’ve named to handle your affairs after you’re gone may be deceased or too sick for the job. Your estate plan needs to reflect these changes in your life and in your family. What you wanted ten years ago may not be what you need now.
Appointing the wrong person as executor or trustee. Don’t feel obligated to name someone as executor or trustee because you don’t want to hurt their feelings. It’s much more important to name an organized person who can get along with the beneficiaries, communicate with them, and keep them informed. It’s also important to name successors in case the first person you name is unable to take on this role. For your peace of mind (and theirs), you should talk with this person before appointing them to this critical role to make sure they are willing to take it on.
Reference: Kiplinger (Dec. 30, 2023) “Common Estate Planning Mistakes”