“Planning is bringing the future into the present so that you can do something about it now.”
Alan Lakein – American author
When many people hear the term “estate planning” they think it only applies to those who own mansions, extensive real estate holdings, and large stock portfolios. They may recall news stories about estate battles that ensued when celebrities like Prince, Jimi Hendrix, and Michael Jackson died without a will.
Despite these myths and misconceptions, the truth is that everyone should have an estate plan or a will. According to a recent survey from Caring.com, 2 out of 3 adults do not have a will. If you die without a will, there is no guarantee that your intended wishes will be carried out and it can lead to fighting among potential heirs.
Estate planning can be complex, depending on your estate and circumstances. This article will help you recognize common mistakes that can be avoided with proper planning. As always, we recommend consulting with an estate attorney.
Here are five common mistakes to avoid.
- Dying without a will. A last will and testament is a legal document that puts you in control of what happens with your estate after you die. You can also use a will to leave instructions for your digital assets, provide funeral instructions, and support your favorite charities. When you die without a will, the state succession laws and the probate process determine how your assets are given away – and this includes money, real estate, pets, and family heirlooms.
If you are a parent, you can use your will to designate a guardian for your minor children. If both parents pass away, this is a critical circumstance for those who don’t have a will. If you have not designated a guardian in your will, the court will choose one for your children.
- Ignoring beneficiary designations. Retirement accounts, life insurance, and investment accounts can all avoid probate if you have a designated beneficiary. These designations override provisions in a will. For example, let’s say an IRA account at ABC Brokerage names your son as primary beneficiary, but the will names your daughter as the heir of the account. In this case, your son will receive the IRA, not your daughter. Best practice is to review beneficiary designations annually.
- Not updating your estate plan. Creating an estate plan isn’t something you set up and forget about. Life events such as death, divorce, marriage, births, relocations, and tax law changes can trigger the need to update your will or trust.
- Using do-it-yourself estate planning tools. It may be tempting to download a free online template to create a will, but don’t underestimate the value of experienced estate planning professionals. They can provide tailored advice to suit your family’s circumstances and help you avoid mistakes. Also, failure to properly execute and/or witness the will may render your document worthless.
- Failing to create advance directives. In Tennessee, there are two forms that you can complete to document your wishes for medical care. A Medical Power of Attorney, now referred to as an Appointment of Health Care Agent, allows you to name another person to make healthcare decisions for you if you are unable to make them for yourself. A Living Will, now known as an Advance Care Plan, is a document that tells your doctor how you want to be treated if you are terminally ill or permanently unconscious.
Creating and implementing an estate plan ensures that your wishes will be carried out when you are no longer here. Avoiding estate planning mistakes can ensure that your intent is documented, while relieving stress for heirs.