Five Scary Estate Planning Mistakes That Will Leave Your Loved Ones Haunted
Come October witches, ghosts, and scary faces start popping up all over the place. No pharmacy or front yard is safe! While we may enjoy dressing up for Halloween or seeing a scary movie, we do not want to leave our loved ones haunted by our poor estate planning. Here are five scary mistakes to avoid:
Scary Mistake #1: Only Having a Will. A will is the foundation of a great estate plan, but it is important to have more than just a will. It is also critical to also have powers of attorney. A power of attorney allows the person of your choosing to help you carry out your day to day operations and if needed make decisions on your behalf. More and more institutions are requiring proof of legal authority before they will even speak with someone. Failure to put a power of attorney in place risks leaving that decision up to someone you did not choose or even a court, and you may not like the result.
Scary Mistake #2: Getting Your Will Done Online. We have given the Internet so much authority that we now turn to it as a legal authority. Not only do we allow Wikipedia to serve as the breaker of all disagreements, we also turn to quick-fixes to meet, what we consider “easy” legal needs like our wills and powers of attorney. These online services all work similarly: they are document banks. When you go to a legal document bank, you need to know what you need. This is where the trouble begins, you may not know what you need or even what options may be available. Personalized advice is often offered at an additional cost and this advice comes in the form of customer-service (think waiting on hold for forever). You do not have the opportunity to sit down with an attorney that practices law in your state. Many of these services do not provide state specific forms, which can also lead to costly issues.
Scary Mistake #3: Forgetting to Update Your Beneficiaries. Beneficiary designations are a wonderful tool to avoid probate. They can speed up your beneficiaries’ access to funds and reduce their costs to access your assets. However, beneficiary designations can also be a reason why estate plans go wrong. For example, let’s say Sally updates her will to remove Bill as a beneficiary and instead leaves everything to Tim. Sally has a bank account with a beneficiary designation leaving everything to Bill. If Sally does not change the beneficiary on her account from Bill to Tim, then Bill will receive the entire account. This could be a significant portion of Sally’s estate. For this reason, it is important when you make a change or update to your will you also consider you beneficiary designations.
Scary Mistake #4: Failing to Tell the Right People the Right Information. A recently published study claimed that while nearly three-fourths of parents thought they had discussed their estate plan with their kids, less than half of kids said their parents had discussed their estate plan with them. Talking about your estate plan can be an important step in your planning process. Of course, each family is different, and each family’s dynamics are different. In general, you should at least tell the people named first in your documents where your documents are and how to locate them in the event of an emergency.
Scary Mistake #5: Not Updating Your Documents. One of the most common questions I receive is “when should I update my will?” The answer is it depends! Generally, there is no hard and fast rule that after x number of years you should update your will. The need to update your will is usually driven by changes in your family, changes in what you own, and changes in your wishes.
There are five life events that should trigger a call to your estate planning attorney: birth, death, marriage, divorce, and a move. If you or any of your beneficiaries experience these major life changes it may be time to take a look at your will. It is especially important to review your estate plan when you move to another state. Often, wills are drafted with contingencies and may not even require an update. On occasion, these life events will call for a change to your estate plan.
Another good time to call your estate planning attorney is when what you own changes. If you acquire a new asset, particularly real property, it is important to understand how that fits into your current plan. If your assets are significantly less than the last time you updated your estate plan you may wish to consider simplifying your estate plan.
Finally, any time your estate plan no longer reflects your current wishes you should update your will or trust. Do not wait until it is too late or you are no longer able to change your documents! If you are ever in doubt about whether your estate plan should be updated or not, do not hesitate to give your attorney a call.