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Common Estate Planning Mistakes

Mistake #1: Believing that you are not going to die.

That’s when a client comes into my office and instead of saying, “when I die” says, “if I die.”

Mistake #2: Procrastination.

These are the clients who call on Monday when they’re leaving for vacation on Saturday (a trip planned months ago). Or the client who called me from the airplane to change the guardian of her children.

Mistake #3: Believing that you don’t need an estate plan, either because your estate is too small or because you are too young.

Parents with young children often have little extra cash but have life insurance and pension plans. The old saying of being “worth more dead than alive” applies to them. In the unlikely event that both parents die before their children reach age 18, without proper planning, a court-administered conservatorship will have to be established for each child. Each child will receive his or her share upon reaching age 18, to spend as he or she wishes.

Mistake #4: Believing that having a Will means that you are going to avoid probate.

The Will contains the instructions for the Court for the probate process, naming who you want as executor, that you want your bills and taxes paid, any specific bequests and who is to receive the residue of your estate.

Mistake #5: Believing that your assets are going to pass under the terms of your Will or Trust.

Just because your Will or Trust says who is going to receive your assets does not mean that is what will happen. Many assets pass outside the Will or Trust. Examples are life insurance, IRAs, annuities and other assets that have named beneficiaries.

Mistake #6: Not updating your estate plan.

Heath Ledger, who made his millions in movies (Brokeback Mountain and The Dark Knight), died at age 28. He had a Will which left his assets equally to his parents and his siblings but left nothing to his infant daughter. Remember the 5 D’s of when you should update your estate plan: Divorce, Dependent, Disability, Death and Decade.

Mistake #7: Not planning for incompetence.

Living wills, durable powers of attorney for health care decisions and durable power of attorney for financial decisions are a part of estate planning. Guardianship (over the body) and conservatorship (over the finances) proceedings are burdensome and expensive but are required for a people who do not have those documents and their decision-making capacity is so impaired that they are unable to make, communicate, or carry out important decisions concerning their own care and their financial affairs.

Mistake #8: Failing to update beneficiary designations.

Your retirement plan, life insurance policy and more have beneficiary designation forms. It is important to not only keep the primary beneficiaries updated, but you should have secondary or contingent beneficiaries named in the event that the primary beneficiary has died. Since these forms were often completed years prior when an account was opened or a policy purchased, it’s an easy task to overlook. This is what has happened when a 93-year woman dies with her parents listed as beneficiaries on her life insurance.

Mistake #9: Doing it Yourself (DIY).

Yes, you can prepare your Will yourself, but the attorney you hire is not just preparing documents. The attorney is determining your objectives, advising you on what documents you will need to meet your objectives, drafting the documents to meet those objectives and coordinating the titling of your assets.

Mistake #10: No liquidity.

Not having enough ready cash to pay for the funeral and other final expenses. For example, having cash in accounts that are “payable on death” cannot be accessed without the death certificate which may take several weeks to get.

As one of my clients said, after her husband died suddenly, leaving her with a mess, “I’d kill him, if he wasn’t already dead.”

This is not the legacy you want to leave your family. You want a well-thought out plan that you have developed with the help of an estate planning attorney.

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