Can You Relate to These Common Estate Planning Mistakes?

by | Jul 21, 2021

When you stop and think about it, choosing to do nothing in advance about something negative that is guaranteed to happen seems illogical, doesn’t it? And yet, human nature is that we avoid thinking about negative things, which is why the majority of Americans still die without having estate planning documents in place, for example.

Does that make sense when the result to the surviving family members will almost certainly be delayed settlement, increased cost therefore less to heirs, unclear wishes, feelings of frustration and/or suspicion, additional paperwork, more time commitment, and unnecessary family arguments?

The Good News and the Bad News

The good news is that most of those negative results are preventable. The bad news is that even if you do take the time to put estate planning documents in place, we often make common mistakes in the process. It’s because we don’t know what we don’t know. I invite you to read on, so you do know!

Common Estate Planning Mistakes

#1: Using Online Templates for a Will or Trust

If you drafted a will or trust on your own, using one of those online templates, be aware that those are typically not state-specific so may not be the best option in all cases. A self-drafted document can also be more tempting for family to contest after you are gone since there was no licensed legal advisor involved and the likelihood of something being missed or inaccurate is higher.

I met with a couple once who had used a will kit that they had purchased online. When an attorney reviewed it, they discovered that the will was invalid because they had missed initialing one page in the document, making the whole will null and void. It does not always pay to go the “cheap” route upfront as you may pay more to fix things later.

#2: Failing to Keep Adequate Records

A complete list of assets and family information will help tremendously with estate, tax, and distribution requirements. Along with locating and accessing those assets often comes the need for accessing passwords. Yes, another list that is important.

#3: Naming a Representative at Random

Fully considering who will be your executor/personal representative or successor trustee often deserves more attention than people may realize. It is common for people to name family members out of obligation or to avoid offending anyone.

But there are distinct responsibilities that require organizational skills, comfort with paperwork, and an understanding of the required processes. So, choosing the right person who is both competent and understands your values is critical.

#4: Disregarding the Importance of Account Titles

I know I have preached ad nauseum about the importance of updated account titles and current beneficiary designations. It is a common mistake that people do not realize that a will is secondary to both account titles and beneficiary designations.

#5: Not Planning for Incapacity

Not considering the importance of planning for incapacity is another estate planning oversight. It won’t happen to me! Or so we think. Yet I bet we all know someone who ended up in the hospital unexpectedly.

In those instances, someone had to make medical decisions and sign financial forms while the patient was unable to. Having powers of attorney in writing for both health care and financial responsibilities should be completed in advance of ever needing them.

Important but Often Overlooked

There are a few other areas I wouldn’t call mistakes but are certainly important yet often overlooked. Deciding whether you want an immediate or “springing” power of attorney for health care documents, for example. Be sure your estate planning attorney explains the difference and asks you which one makes the most sense in your situation.

Make it a habit to pull out and reread your documents every 3-5 years, when the law changes, or when you have had a change in your financial or family circumstances. It really helps to have an estate plan outline so you can see all the details at a glance. And even if you don’t think you have any changes that need to be made, call the estate planning attorney anyway to ask if there have been any legal changes since your last draft that warrant an update.

And don’t forget about a Personal Property Disposition List. It can be as simple as a handwritten list on a piece of paper. This is your chance, if you have specific wishes, to clarify who gets what on any personal items you may own.

If you want your mother’s wedding ring to go to your niece, or a family heirloom to go to a son, or a coin collection to go to a grandchild you can describe the item, spell out the name of the recipient, and then sign your name and date at the bottom. Keep that paper with your will/trust and feel free to rewrite/sign/date and replace it any time you want to make changes.

It’s Up to You!

“I won’t care about any of this, I will be gone,” you may be thinking. Or maybe you do have preferences but find it depressing to think about let alone take action on end-of-life matters.

As they say, death and taxes are the two certainties in life. We are certain our life will end at some point. Awareness, of how to make that time less painless for those left behind, is the first step toward action. Now it’s up to you to take action, the next step that counts the most!

Marie Burns is a Certified Financial Planner, Speaker, and Author of the bestselling Financial Checklist books. Find Marie on Facebook or contact her at [email protected]

This article was first published at 60 and Me – a community that helps women over 60 live happy, healthy and financially secure lives.