Because estate planning involves actively thinking about and planning for frightening topics like death, old age, and crippling disability, many people put it off or simply ignore it altogether until it is too late. Sadly, this unwillingness to face reality often creates serious hardship, expense, and trauma for those loved ones you leave behind.
To complicate matters, the recent proliferation of online estate planning document services, such as LegalZoom®, Rocket Lawyer®, and Trustandwill.com, may have misled you into thinking that estate planning is a do-it-yourself (DIY) affair, which involves nothing more than filling out the right legal forms. However, proper estate planning entails far more than filling out legal forms.
In fact, without a thorough understanding of how the legal process works upon your death or incapacity, along with knowing how it applies specifically to your family dynamics and the nature of your assets, you will likely make serious mistakes when creating a DIY will or trust. And the worst part is that these mistakes will not be discovered until you are gone—and the very people you were trying to protect will be the ones stuck cleaning up the mess you created just to save a few bucks.
Estate planning is definitely not a one-size-fits-all endeavor. Even if you think your particular situation is simple, that turns out to almost never be the case. To demonstrate just how complicated estate planning can be, last week in part one, we highlighted the first five of 10 of the most common estate-planning mistakes, and here we wrap up the list with the remaining five mistakes.
6. Not Updating Beneficiary Designations
In addition to reviewing and updating your core estate planning documents like your will, trust, and power of attorney, it is crucial that you also update the documentation for your other assets, especially those with beneficiary designations. Some of your most valuable assets, like 401(k)s, IRAs, and life insurance policies, usually transfer outside of a will or trust.
Instead, these assets have beneficiary designations that allow you to name the person (or persons) you would like to inherit the asset upon your death. Oftentimes, people forget to change their beneficiary designations to match their estate planning goals, which can lead to disaster. For example, if you get remarried and forget to update your 401(k), your ex-spouse from 20 years ago could end up inheriting your retirement savings.
Additionally, some people assume that because they have named a specific heir as the beneficiary of their IRA in their will or trust that there is no need to list the same person again as a beneficiary in their IRA paperwork. Because of this, they leave the IRA beneficiary form blank or list “my estate” as the beneficiary. But this is a major mistake—and one that can lead to serious complications and expenses for your loved ones. It makes no difference who is listed as the beneficiary in your will or trust; you must list the person you want to inherit the asset in the beneficiary designation, or your heirs will have to go to court to claim the asset.
And you should never name a minor child as a beneficiary of your life insurance or retirement accounts, even as the secondary beneficiary. If a child inherits assets, the assets become subject to the control of the court until they reach the age of 18, and then, the assets are distributed outright without any protection or direction. If you want a minor to inherit assets, you can create a special trust to hold the asset until the child comes of age, and name someone you trust to serve as a successor trustee to manage the assets until that time. We can support you in choosing the appropriate trust for this purpose to ensure your child(ren) gets the maximum benefit from their inheritance.
7. Improper Execution You could have the best estate planning documents in the world, but if you fail to sign them, or sign them improperly, they will fail. This might seem trivial, but we see it all the time. A loved one dies, their family brings their estate planning documents to us, and we cannot help them because the documents were either not signed or were signed improperly.
To be considered legally valid, certain estate planning documents like wills must be executed (i.e. signed, witnessed, and/or notarized) following very strict legal procedures. For example, many states require that you and every witness to your will must sign it in the presence of one another. If your DIY service does not mention that condition (or you do not read the fine print) and you fail to follow this procedure, the document can end up worthless.
8. Choosing The Wrong Executors Or Trustees In addition to laws regarding execution, state laws are also very specific about who can serve in certain roles like executor, trustee, or financial power of attorney. In some states, for instance, the executor of your will must either be a family member or an in-law and if not, the person you choose must live in the state. If your chosen executor doesn’t meet those requirements, he or she cannot serve.
Moreover, some states require the person you name as your executor to get a bond, which is like an insurance policy before he or she can serve. Such bonds can be difficult to get for someone who has a less-than-stellar credit score. If your executor cannot get a bond, it would be up to the court to appoint your executor, which could end up being someone you would never want managing your assets or a third-party professional, who could drain your estate with costly fees.
Through our Life & Legacy planning process, we will guide you to choose the most appropriate and qualified executors and/or trustees to manage your estate and assets.
9. Unintended Conflict Between Family Members Family dynamics are—to put it lightly—quite complex. This is particularly true for blended families, where spouses have children from previous relationships. If you try to go it alone using a DIY document service, you will not be able to consider all of the potential areas where conflict might arise among your family members and plan ahead to avoid such disputes. After all, even the best set of documents will be unable to anticipate and navigate these complex emotional matters—but we can.
Every day we see families end up in lifelong conflict due to poor estate planning. Yet, we also see families brought closer together as a result of handling these matters the right way. When done right, the estate planning process is actually a major opportunity to build new connections within your family, and our lawyers are specifically trained to help you with that.
In fact, preventing family conflict with proactive estate planning is our special sauce and one of the many reasons to work with us rather than relying on DIY planning documents, which will not identify or prevent unforeseen family disputes.
10. Failing To Properly Name Guardians For Minor Children If you are a mom or dad with children under the age of 18 at home, your number-one estate planning priority should be selecting and legally documenting both long and short-term guardians for your kids. Guardians are the people legally named to care for your children in the event something happens to you.
If you have not named guardians for your kids yet, use the link below to find out how you can take care of this critical task right now. And if you have named guardians for your minor children in your will—even with the help of another lawyer—your kids could still be at risk of being taken into the care of strangers.
For instance, if you have named guardians for your kids in your will, what would happen if you became incapacitated and were no longer able to care for them? Did you know that your will only becomes operative in the event of your death, and it would do nothing to protect your children in the event of your incapacity?
Or perhaps the guardians you named in your will live far from your home, so it would take them several days to get there. If you have not made legally-binding arrangements for the immediate care of your children, it is highly likely that they will be placed with the authorities until those guardians arrive.
And does anyone even know where you will is located and how to access it? How can they prove they are your children’s legal guardians if they cannot even find your estate plan?
These are just a few of the potential complications that can arise when naming legal guardians for your kids, whether in your will or as a stand-alone measure. And if just one of these contingencies were to occur, your children would more than likely be placed into the care of strangers. Sadly, we see this happen even to those parents who have worked with lawyers to name legal guardians for their children, and that is because most lawyers simply do not know what is necessary for planning and ensuring the well-being and care of minor children.
⇒ If you have yet to take any action at all, visit our website and schedule a 15-minute needs analysis to take the first step in discssing your plan. Get started here now: https://www.calendly.com/raina-rlp.
After you have completed that step, schedule a Family Wealth Planning Session™ with us so we can put your plan in place. From there, we can determine if there are any other estate planning measures that your family might need to ensure the well-being and care of your children no matter what happens.
⇒ If you have already named long-term guardians in your will or as a stand-alone measure, either on your own or with a lawyer, we can review your existing legal documents to see whether you have made any of the most common mistakes that could leave your kids at risk. From there, we will revise your plan and put the proper protections in place to ensure your children are fully protected.
Life & Legacy Planning: Do Right By Those You Love Most The DIY approach might be a good idea if you are looking to build a new deck for your backyard, but when it comes to estate planning, it is actually one of the worst choices you can make. Are you really willing to put your family’s well-being and wealth at risk just to save a few bucks?
If you have yet to do any planning, contact us to schedule a Family Wealth Planning Session, which is the first step in our Life & Legacy Planning Process. During this initial meeting, we will take you through an analysis of your assets, what is most important to you, and what will happen to your loved ones when you die or if you become incapacitated.
If, as a result of this process, we determine that you really do have a very simple situation and you want to create your own estate planning documents yourself online, we will support you to do that. However, if as a result of the process, you decide you would like us to create a plan for you, we will support you to find the optimal level of planning for a price that is right for you.
And if you have already created an estate plan—whether it is a DIY job or one created with another lawyer’s help—contact us to schedule an Estate Plan Review & Check-Up. With our support, we will ensure your plan is not only properly drafted and updated, but that it has all of the protections in place to prevent your children from ever being placed in the care of strangers or anyone you’d never want to raise them.
In either case, working with us will empower you to feel 100% confident that you have the right combination of estate planning solutions to fit your unique asset profile, family dynamics, and budget. We see estate planning as far more than simply planning for your death and passing on your “estate” and assets to your loved ones—it is about planning for a life you love and a legacy worth leaving by the choices you make today—and this is why we call our services Life & Legacy Planning. Contact us today to get your plan started.
This article is a service of Reflections Life Planning LLC. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.