Because estate planning involves actively thinking about and planning for things like death, old age, and disability, many people put it off or simply ignore it. Avoiding these potentials can create hardship, expense, and trauma for the loved ones you leave behind.
The recent proliferation of online estate planning document services, such as LegalZoom®, Rocket Lawyer®, and Trustandwill.com, could mislead you into thinking that estate planning is a do-it-yourself affair that requires filling out simple forms. Proper estate planning involves far more.
Many people do not understand the legal process their family must go through for their assets upon death or incapacity, so they are happy to settle with a DIY will or trust. Mistakes made in DIY documents usually are not discovered until you are gone. Your loved ones are stuck cleaning up the mess. This is exactly opposite of your objective when you created these documents, which was to protect your loved ones from added stress and hardship.
Estate planning is not a one-size-fits-all endeavor. Even families that believe they have a “simple” estate should have a personalized plan. Last week in part one, we discussed 5 of the 10 most common estate-planning mistakes, and this week we are discussing the remaining five mistakes.
6. Not Updating Beneficiary Designations
When you create an estate plan, an inventory of your assets, along with your will, trust, and power of attorney, should stay up to date. It is especially important to update your assets with beneficiary designations. Some of your most valuable assets, like 401(k)s, IRAs, and life insurance policies, do not transfer via a will or trust.
These assets have beneficiary designations that allow you to name the person (or persons) you’d like to inherit the asset upon your death. People often forget to change their beneficiary designations to match their estate planning goals. 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.
Some people assume that if they name an heir as the beneficiary in their will or trust, they do not need to list them as the beneficiary on their IRA paperwork. If the beneficiary is left blank or “my estate” is listed, expensive complications can occur.
It does not matter 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.
We recommend you do not name a minor child as a beneficiary or second 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 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 assets until the child comes of the age or ages you think they should receive the benefit. Through that trust, you can name someone to serve as a successor trustee to manage the assets until your child is old enough to manage the assets on their own. Together, we can design a trust that accomplishes your goals and allows your child to get the maximum benefit from their inheritance.
7. Improper Execution Even with a proper plan set up, your documents could fail if they are missing a signature or signed improperly. This might seem trivial, but it happens.
To be considered legally valid, your will and other estate planning documents must be signed, witnessed, and often notarized following strict legal procedures. Many states require that you and every witness 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 your will doesn’t follow this procedure, the document can end up worthless.
8. Choosing the Wrong Executors or Trustees State laws are also very about who can serve in certain roles like personal representative, trustee, or financial power of attorney. In some states, the personal representative (sometimes called 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 personal representative doesn’t meet those requirements, he or she cannot serve.
Some states require your personal representative get a bond (like an insurance policy) before he or she can serve. Bonds can be difficult to get depending on one’s credit score. If your personal representative cannot get a bond, the court will appoint someone else who could end up being someone you would not want managing your assets or it could be a professional who will charge fees and drain your estate.
9. Unintended Conflict Between Family Members Family dynamics are complex. With a DIY document service, you could fail to consider the potential areas where conflict might arise in your family, making you unable to proactively avoid these disputes. We have seen poor estate planning cause lifelong family conflict. We have also seen families brought closer together by discussing and putting in place a proper estate plan. The planning process can be an opportunity to build connections instead of breaking them down.
10. Failing To Properly Name Guardians For Minor Children If you are a parent with minor children 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 if you cannot.
If you haven't named guardians for your kids yet, our link below is a great place to get started right away and for free. Even if you have named guardians for your minor children in your will, there are more steps that can make so that your children will not be a risk of being taking into the care of strangers.
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? Your will only works after your death and does nothing to protect your children in the event of your incapacity.
If the guardians you named in your will live far away, it could take them several days to get to your children. If you haven’t made legally binding arrangements for their immediate care, they could be placed with the authorities until those guardians arrive.
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 can’t find your estate plan?
These are just a few potential complications that can arise when naming legal guardians for your kids, whether in your will or as a stand-alone measure. With just one of these contingencies, your children could be placed into the care of strangers.
Every estate plan we prepare for families with young children includes the Kids Protection Plan. On our website, you can find this service to name long-term guardians. We believe in the importance of putting guardians in place right away, so we offer this completely free. By completing the Kids Protection Plan on our website, should anything happen to you prior to creating your full estate plan, your kids would be cared for by the people you would want. Through our planning process, we can make sure the full guardian naming process, including naming short-term guardians, is completed.
Get started here now: https://www.flalawfirm.com/kidsprotectionplan
By meeting with us, 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, we can review your existing documents. We can revise your plan and put the proper protections in place so that your children are protected.
Life & Legacy Planning: Do Right by Those You Love Most The DIY approach can contain flaws that won’t allow you to accomplish your goals. Not spending the resources to create a proper plan will cause many more expenses for your family and heirs. Our firm offers a free educational planning session to inform you on the options you have for your estate plan. During this meeting, we’ll discuss an analysis of your assets, what’s most important to you, and what will happen to your loved ones when you die or if you become incapacitated.
If, after this meeting, we determine that you have a very simple situation and you want to create your own estate planning documents yourself online, we will support you in that. If you decide you would like us to create a plan for you, we’ll work together to find the optimal level of planning that’s right for you. And if you’ve already created an estate plan, whether it’s a DIY plan or one created with another lawyer, we can review your current plan.
Our goal is to make you feel empowered and confident in your knowledge and your estate plan. We will draft solutions to individual family complexities and put the right plan in place for you, your family, and your budget. We see estate planning as far more than planning for your death and passing on your “estate” and assets to your loved ones, it’s about planning for a life you love and a legacy worth leaving by the choices you make today.
This article is a service of Jennifer Winegardner of Rayboun Winegardner, PLLC. 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.