Many people believe that a simple will is all they need to accomplish their goals for the future.
However, a flawed estate plan can create just as many headaches, heartaches, and expenses
for your loved ones as having no plan. Life changes, laws evolve, and even the best intentions
can fall short, leaving family members facing court battles, unexpected taxes, or painful
disagreements. Here are 12 common mistakes that might be hiding in your estate plan that can
jeopardize your hard-earned money and property, diminish your legacy, and place unnecessary
burdens on your loved ones. Ask yourself: Is my current plan truly ready for the future, or is it
time for a review?
- Lack of healthcare planning. Most deaths occur in hospitals or other healthcare facilities,
where many patients near the end of their life are unable to make or communicate their
decisions. Without a plan, families and providers can be left guessing. Advance directives
outline your preferences for end-of-life care; healthcare powers of attorney appoint a trusted
person to make decisions on your behalf when you cannot. Together, these documents
ensure that your medical wishes are honored and can be paired with financial powers of
attorney to protect your property and finances during incapacity. - Failure to appoint financial decision-makers. There may come a time when you need
someone to manage your financial and legal affairs, either because you are incapacitated or
simply unavailable for a specific transaction. A financial power of attorney allows you to
appoint a trusted person to act on your behalf, ensuring that bills are paid and important
matters are handled without the need for court intervention. - No will or trust. Without proper planning, your estate may be held up in the often long,
public, and costly probate process for months or even years after your death, at a great
emotional and financial cost to your family. If you have no will, a judge will apply the state’s
statutory default distribution plan to determine who will receive an inheritance from you and
how much they will receive. This plan may not match your wishes. - Lack of attention to digital assets. Without a plan for your digital assets (such as digital
photos, cryptocurrency, nonfungible tokens, social media profiles, content creation
accounts, and accounts associated with e-commerce businesses) your loved ones may lose
access to critical documents, photos, memories, and other important family records. They
may also be unable to access any bank accounts or money associated with or generated by
your digital assets or accounts. - Failure to anticipate your children’s possible future divorces, creditors, or lawsuits.
Although it is not fun to consider, if your children divorce, rack up massive debt, or are sued
at some point in the future, their inheritance could be lost and end up in the hands of
unintended people. A trust can help protect your legacy and your children’s inheritance. - Failure to provide for an intentional transfer of family values. Do you want to pass on
more than just money to your loved ones? A comprehensive estate plan can include
provisions regarding family meetings, a family mission statement, and custom planning for
your loved ones so that your values will continue into the next generation. Your custom plan
could include allowing loved ones to choose a charity to receive part of your accounts or
property, setting money aside for future family reunions or travel, or building in provisions to
incentivize major milestones such as getting married or graduating from college. - Wasted individual retirement account (IRA) funds. Retirement account beneficiaries
generally have the option to receive funds in a lump sum, which could result in a massive
income tax bill for them. If this is not your intent, it is crucial to properly plan these accounts
to minimize potential tax consequences. A standalone retirement trust, sometimes called an
IRA trust, can help safeguard retirement funds from premature or imprudent withdrawals as
well as from beneficiaries’ creditors and financial predators while still ensuring that those
assets are available to support your beneficiaries. - Chaotic record-keeping. Proper planning ensures that your loved ones do not spend
months or years trying to piece together your finances or interpret your wishes. A
comprehensive estate plan helps you organize your finances and create a clear system for
keeping your important documents, financial information, and instructions about your wishes
in one place, readily accessible to your loved ones when they need them most. - Failure to consider a surviving spouse’s remarriage, creditors, and predators. If your
surviving spouse remarries, your estate could end up in the hands of people you never
intended. Likewise, if your surviving spouse is victimized by financial predators—something
increasingly common with an aging population—your family may discover too late that your
legacy is gone. A trust can help protect your money after you are gone. - Family feuds over sentimental items. Sometimes fights are not just about money. Feuds
and infighting among your loved ones can occur over items that have little monetary value
but high sentimental value. You can help avoid such conflict with a personal property
memorandum that lists who gets special items such as artwork, family heirlooms, and
jewelry. In addition to the financial accounts, your plan should include careful consideration
of important family items. - Health Insurance Portability and Accountability Act (HIPAA) privacy lockout. If
incapacity leaves you unable to communicate, family members—even your spouse—may be
unable to access your medical records or talk to your doctors because of HIPAA privacy
rules. Signing a HIPAA authorization form ensures that the people you choose can access
your medical information. - Outdated estate plan. Does your estate plan reflect your current circumstances, goals, and
needs? Have you, your beneficiaries, or your trusted decision-makers had any major life
changes (such as getting married, having a child, passing away, divorcing, receiving an inheritance, or moving to a different state)? A comprehensive review by an estate planner ensures that your estate plan reflects current laws and tax rules and carries out your wishes based on your and your loved ones’ lives today.
Do not leave your family vulnerable to these common oversights. A strong estate plan provides peace of mind, knowing that your loved ones are protected and your wishes will be honored. If you recognize any of the above mistakes in your own plan, or if it has been years since your last review, now is the time to act. Contact us today for a comprehensive review and to create a plan that truly reflects your life and legacy.
