Estate Planning Mistakes
What are the biggest estate planning mistakes someone can make? Below is Welch Law’s Top 10 list based on our experience working with clients.
1. Not Doing One
This is perhaps the most common estate planning mistake. Well over 60% of Americans under the age of 65 do not have an estate plan in place. Statistically, most of those people will live to be well over the age of 65, so perhaps it is not that big of a deal. Wrong. These same people have loved ones, retirement plans, savings, sometimes minor children, and liabilities. Estate planning is not just about death, rather, it is about protecting assets and loved ones through life, incapacity, death, and even beyond. Remember, it is not only for the wealthy.
2. Beneficiary Designations
Whether a transfer on death, pay on death, beneficiary designation, or otherwise, many people just do not keep up with their financial and physical assets. Failing to maintain beneficiary designations, particularly up to date designations, can wreak havoc on a family after a loved one passes away. Not to mention, as a probate attorney, simple mistakes can greatly increase the costs associated with administering an estate.
3. Not Updating Your Plan
Life changes, and with those changes, your estate plan may as well. Major life events, as we call them, include death, divorce, birth/adoption, disability, increased wealth, and new major or titled asset purchases. While some of these occurrences may be handled in your estate plan, it is always wise to review your documents to be safe.
4. You Got the Wrong Guy
When selecting fiduciaries for your estate plan, there are many factors to consider. Age, ability, desire, competence, and trust are just a few. Perhaps naming Uncle Joe as the trustee is a good option today, but do not forget estate planning mistake #3, if Uncle Joe decides to take a walk on the wild side.
5. Failing to Consider Minor Beneficiaries
Whether your children, grandchildren, or otherwise, minors cannot typically inherit financial or titled assets (there are some exceptions). So while naming your spouse as a primary beneficiary on a life insurance policy, and then your minor children as contingent beneficiaries may make sense. Be mindful that as a direct beneficiary the money will have to be awarded to a custodian in care for the child if both you and your spouse pass away. Or, possibly worse, your child is no longer a minor, yet still too young to properly manage a sizeable inheritance. (What would you have done with a $100,000.00 inheritance at 18?) One of the main reasons revocable living trusts are great estate planning tools for young families.
6. Speaking of Minors, Who Will Raise Yours?
Most likely, you will. Again, statistically speaking, most of us are going to live well into our 70’s or 80’s. However, one of the key features of starting your estate planning at a much younger age is making sure you can dictate to the court who will raise your minor children just in case the stats do not go your way. We call this the “Crazy Aunt Sue” clause, also legally known as selecting a guardian. (Sorry for any Sue’s reading this).
7. Failing to Work With Your Team.
Estate planning is much more than creating a will, or a trust, or some power of attorneys. It is an overall strategy to preserve and protect your financial wealth and peace of mind. Knowing which assets to transfer to whom and through which vehicles those transfers should be made takes some education and some work. Attorneys, financial advisors, HR managers, accountants, and others may be a part of your team in making sure your estate plan works the way you want it to. This is a team sport!
8. Not Planning for Incapacity or Injury
We already acknowledge that many of us will live long lives, but what about those of us who will suffer some sort of incapacity or serious disability? Thinking through these scenarios can help us pinpoint someone who can step in to manage our affairs in case we are temporarily, or permanently, unable to do so.
9. Failing to Fund Your Living Trust
This is a topic that comes up very often when we are assisting a family after the death of a loved one. It relates to, and sometimes includes, estate planning mistake #2 above about beneficiary designations. Failing to place assets into the trusts name, or naming the trust as a beneficiary, means that those assets will likely pass through probate. Even assuming your plan is properly protected with a “pour over will”, it still means those assets are tied up in the probate courts for at least 6+ months and become public knowledge.
10. Do It Yourself Plans
We most commonly encounter DIY plans when a loved one contacts us after someone passes away. There are many varieties of DIY estate plans. Some are vague and difficult to interpret, others are “ok”, but fail to accomplish the decedent’s gifting intent. Part of the reason is because they are mostly stock forms and self-administered. More often than not, however, the court will accept a DIY will and adhere to its terms; whether those terms were intentional or not is another story. Because of the inherent risks associated with DIY estate plans, we discourage their use unless absolutely necessary.
Top 10 Estate Planning Mistakes Conclusion
We see many other estate planning mistakes on a regular basis. This list only demonstrates some of the most common and widely spread we encounter.
If you are ready to take action and make your estate plan a priority, give us a call at (636) 352-1222 or contact us here. We are happy to answer any questions or schedule a complimentary initial consultation.
A recent survey prepared by WealthCounsel™ shows that 74% of Americans find the topic of estate planning “confusing” and this may be the single most important factor in why so few Americans create a plan. (See, https://craft.wealthcounsel.com/images/downloads/Estate-Planning-Awareness-Survey-2016.pdf?_ga=2.69767184.10191608.1509553032-1820087755.1509553032) While this is a staggering number, we believe the blame falls on estate planning attorneys. If you find yourself confused with the topic, call an estate planning attorney, schedule an initial consult, and get the answers you deserve. Many estate planning attorneys offer free initial consultations.