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 all together until it’s too late. Unfortunately, by doing so it creates serious hardship, expense, and trauma for those loved ones you leave behind.
To make things worse, the increase in use of online DIY estate planning has misled many into thinking that estate planning is a simple affair of filling out the right legal forms. However, proper estate planning is much more than signing some documents.
In fact, without a thorough understanding of how the legal process works upon your death or incapacity and applies specifically to your family dynamics and the nature of your assets, chances are high you will make serious mistakes and leave a mess for your loved ones. Estate planning is not a one-size-fits-all preparation, meaning many things need to be considered and factored into play before creating your estate plan. Even if you think your particular situation is simple counting on an online DIY legal document be a terrible mistake.
In order to best demonstrate this, last week we covered the first five of 10 common estate-planning mistakes which can cost you much more than an estate plan. Today, we will cover the remaining five mistakes. Be on the lookout for all the mentioned mistakes, in order to best protect you and your loved ones.
Keeping Beneficiary Information Updated
In addition to reviewing and updating your core estate planning documents like your will, trust, and power of attorney, it is important you also update the documentation for your other assets, especially those with beneficiary designations. Some of the most valuable assets including 401(k)s, IRAs, and life insurance policies, do not transfer via a will or trust.
Instead, these assets have beneficiary designations that allow you to name the individual(s) you’d like to inherit the asset upon your death. It happens quite often that people forget to update their beneficiary designations to match their estate planning goals. For instance, 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, many people believe there is no need to name the same person as beneficiary since they are already named on your will or trust. However, 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.
Side note: you should never name a minor child as beneficiary of your life insurance or retirement accounts. If a child inherits assets, the assets become subject to control of the court until they reach the age of 18, and then, the assets are distributed outright without any protection or direction. In the event you want your underage children to inherit, 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.
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 it happens frequently. A loved one dies, their family brings their estate planning documents to us, and we can’t 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 doesn’t mention that condition (or you don’t read the fine print) and you fail to follow this procedure, the document can end up worthless.
Failing to Choose Wisely
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.
Due to states having different regulations, it is vital you stay informed on what the state you live in requires before creating an estate plan. Nobody wants to find themselves in conflict and in court after the death of a family member.
Family Conflicts
Family dynamics are—to put it lightly—quite complex. This is particularly true for blended families, where spouses have children from previous relationships. Trusting a DIY estate plan won’t allow you to consider all the potential conflicts that may arise between your family members. After all, even the best set of documents will be unable to anticipate and navigate these complex emotional matters.
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 stronger and healthier relationships with your loved ones.
Naming Guardians For Minor Children
If you are a parent with children under the age of 18 at home, your 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 of your death or incapacitation.
If you haven’t named guardians for your kids yet, feel free to visit the link below to get started. https://legacycnsl.com/planning-for-your-kids/
There are several potential complications that can arise when naming legal guardians for your kids, whether in your will or as a stand-alone measure. For instance, if you’ve named guardians for your kids in your will, what would happen if you became incapacitated and were no longer able to care for them? or perhaps the guardians you named in your will live far from your home and does anyone even know where you will is located and how to access it? In the event that any of these 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’ve worked with lawyers to name legal guardians for their children, and that’s because most lawyers simply don’t know what’s necessary for planning and ensuring the well-being and care of minor children.
Properly Planning for your Legacy
The DIY approach might be a good idea if you’re looking to build a new closet, but when it comes to estate planning, it’s actually one of the worst choices you can make.
If you’ve yet to do any planning, contact us today to schedule a Legacy Session, which is the first step to begin your estate plan. During this initial meeting, we will begin to consider your assets, what’s most important to you, and what will happen to your loved ones when you die or if you become incapacitated, in order to create an estate plan unique to your family’s dynamic, your assets and your values.
In the case you already have an estate plan in place, whether it’s a DIY job or one created with another lawyer’s help, contact us to ensure your plan in updated and properly executed. At Legacy Counsel we will ensure your plan is not only properly drafted and updated, but that it has all of the protection in place.
Regardless of your situation, working with us will offer you the peace of mind you deserve, knowing you have done everything in your hands to best protect your loved ones. At Legacy Counsel, we know estate planning is more than simply planning for your death and passing on your “estate” and assets to your loved ones, rather than planning for a life you love and a legacy worth leaving by the choices you make today. Contact us today to get your plan started.
