What are we always talking about on this blog? Having an estate plan, right? But, just having a plan in place isn't always enough. For that plan to work properly when you need it, it needs to be comprehensive, carefully drafted, and thoroughly reviewed. Your goals need to be thoughtfully laid out, and then the plan needs to take advantage of every law available to you to create the result you want. Of course, this doesn't always happen in practice. Over the years, I have seen estate plans fail for any number of reasons. Some of these reasons keep coming up again and again. This week, let's dive into the top five estate planning mistakes:
Failing to Update a Will
One of the biggest mistakes someone can make is finalizing an estate plan, putting it away and simply forgetting about it. The directions and instructions included in a Will only take a snapshot of where the testator's life is at that moment. It does not change as the testator's life changes.
For instance, the person creating the Will may be married with no children at the time the Will is created. However, he or she could then go through a divorce, remarry, and have children.
Complications arise when the testator does not update his or her Will after these major life changes happen. The State of Maryland has the default terms of a Will written for you. If your Will fails to provide information necessary to enact your wishes, the decisions will be left to the Court.
It is for this reason that we recommend that testators regularly review the information in their Will documents: every three years or at least after every major life change. Failing to do this could end up being disastrous for the family of the deceased later on down the road.
Selecting the Wrong Person to Handle the Estate
One of the biggest decisions an individual has to make when preparing his or her estate plan is deciding who will be the executor. The executor is the person in charge of handling the testator's affairs once he or she has passed away.
Many individuals believe that their spouse or children are the best choices for this position, but that may not be the case. This position requires someone who is comfortable handling finances and making tough decisions.
This person may also have to mediate disputes between creditors, loved ones who disagree and many other problems that can present themselves. It needs to be someone who has strong decision-making skills and can handle these matters objectively. Not making the right selection for who will be the executor can make life much more complicated for loved ones.
Only Having a Will
Many individuals also operate under the misconception that having a Last Will and Testament is all that is needed for a complete estate plan. That could not be any further from the truth.
A good estate plan includes not only a Will, but also a financial power of attorney, advance medical directive, and a directive on end of life wishes. These documents are needed just in case injury or illness prevents the individual from making decisions.
If the individual does not have these documents, it leaves their loved ones with no choice but to seek court involvement to get guardianship to be able to make these decisions on their loved one's behalf. That option can be costly, time consuming, and stressful for all involved. It is best to have these documents prepared upfront.
Waiting Too Long to Act
Another monumental mistake someone can make with preparing an estate plan is waiting too long. It is easy to keep the item on the “to-do” list and pushing it off for another day. No one really wants to think about his or her own death, but putting it off only delays the inevitable.
What happens if someone puts it off for too long? The person could get into a serious car accident the next day, and suddenly it is too late, and now the person's loved ones have to handle the estate without a will. This process can be complicated, costly, and stressful. It pays to plan ahead and to not put it off for “another day.”
Avoiding the Conversation
We wrote about this in a recent blog post, but it is time to talk to your loved ones about your estate plan. As it turns out, failure to communicate is one of the leading reasons why families lose generational wealth. Even if there isn't vast wealth to protect, communicating with loved ones about your preferences can ease an incredible burden. Imagine it this way: you pass away or are seriously ill. You have never communicated your wishes to anyone except your lawyer. Now, it's time for your loved ones to make decisions about your medical care, final remains disposition, business holdings, real estate, and other assets. They have your wishes written down in legal language, but it's just not enough. They aren't really sure what you meant or what you would have wanted. You know what happens next? Interpretation, and everyone will have their own way of looking at things. By failing to clearly communicate your wishes to your loved ones, and give them an opportunity to ask questions, you have left them with only the framework of your preferences. Conflict, hurt feelings, and alienation can ensue.
Don't Make These Common Mistakes
These mistakes are common for a reason. They are made time and again because they seem to make sense, or there is a really good reason for them. Nevertheless, they can cause harm to family members and friends alike. If you are not sure whether you have made any of these mistakes or whether you even need an estate plan, let's talk. We can set up a no-strings-attached meeting to assess your circumstances. Call the Tyra Law Firm today at (301) 315-0811.