9 Basic Estate Planning Mistakes and How to Avoid Them

In our monthly column from Karen Minogue, Waccamaw Wisdom, we’ll review how to make smart estate planning decisions for a more secure future. Topic suggestions welcome at communications@mywcf.org.

Truth be told, most people put off estate planning and spend more time each year picking out carpeting or a new car. Indeed, estate-planning blunders are costly and common, even among the fiscally prudent. A good attorney or financial advisor will tell you that any number of oversights can leave you vulnerable in the event you become incapacitated. Others can seriously affect your standard of living, adequate financial planning to enjoy your retirement years, compromise the amount your loved ones will inherit when you die, and if you are charitably inclined, can limit your ability to “give back” to charitable causes dear to you.

The following estate planning mistakes can be easily addressed and spare a lifetime of emotional and financial hardship:

1. DOING NOTHING

The biggest mistake you can make is not making a plan at all. Without a legal document providing specific direction, the state will determine how your assets will be distributed, who will administer your estate, and you should care for your minor children. A valid last will and testament can give you a say. If you want to avoid probate altogether, a revocable living trust will help you do that.

2. PICKING POORLY

Think long and hard about whom you select as your durable power of attorney and medical power of attorney. Your life is literally in their hands. Many people forget that estate planning is a two-part process. Half of the documents you draft provide instruction for divvying up your estate after your die. The other half, and potentially more important, outlines directives for handling your finances and medical care if you become disabled. Ask permission before naming someone to these roles.

The person you select may not want the job or feel up to the task. Finally, make sure you sign a Health Insurance Portability and Accountability Act release, which allows medical professionals to discuss your health with your designated representatives.

3. NOT SETTING ASIDE SUFFICIENT TIME TO THINK AND PLAN

Set aside time to think carefully about your assets, who you want to have them, and to define your objectives in your will. While instructions like “I leave everything to my kids” or “Give it all to charity” may reflect your general wishes, ambiguity can lead to problems after you’re gone. Think through a few steps regarding your family and/or charities you may want to support and work with an attorney trained in estate planning. Think about what should happen to your assets after the death of an heir, especially if blended families are a component of your family.

In the case of charities you may wish to support, consider leaving this portion of your estate to a community foundation to establish a named Designated Fund upon your demise that will forever support the causes that are important to you today. The organizations you name will be supported forever because of your good forethought planning.

4. FAILING TO SIGN A HEALTH-CARE DIRECTIVE

Known also as a “living will,” this document spares your family the emotional angst of having to guess at your wishes when they are already under stress if you are unable to speak for yourself as far as surgery, organ donation, cardiopulmonary resuscitation, and “whether to pull the plug, or not.”

5. NAMING THE WRONG FIDUCIARY OR CONTINGENT FIDUCIARY

Even the most well thought out estate plans can be weakened if you’re not careful with the details. For example, do you have an alternate fiduciary named if the person you’ve identified moves away or dies?

6. NAMING THE WRONG BENEFICIARIES OR CONTINGENT BENEFICIARIES

Think about beneficiary designations on your life insurance policies, retirement plans, etc. Do you have an alternate beneficiary named if the person you’ve identified dies? If you specify a portion of your assets to go to your “children,” would that include adopted or stepchildren (both present and future)?

7. NOT COMMUNICATING WITH YOUR HEIRS OR THE CHARITIES YOU CARE ABOUT

Hollywood and many real-life examples (most recently the estate of Michael Jackson and Prince, for example) demonstrate that in real life you want as few surprises as possible, and you want your wishes to be carried out. Keep your loved ones and charities you care above apprised of your wishes. This will help reduce obstacles and make for a better outcome.

8. SETTING IT AND FORGETTING IT

Families can get bigger and smaller, and your feelings toward certain individuals and causes can change over time. As your personal circumstances change, or your family structure changes, so should your plan.

9. PUTTING YOUR WILL AND OTHER IMPORTANT DOCUMENTS IN A SAFE DEPOSIT BOX

Give a copy of your last will and testament to your attorney and family members. Don’t put it in a safe deposit box. The bank is not allowed to release the contents of a safe deposit box to beneficiaries until probate is complete. By then, the funeral is over and assets have been divided according to state law, not according to your wishes.

WHAT YOU SHOULD DO NOW

Before making any estate plan, carefully consider all your assets and how you want them distributed. A plan that is clear, specific and up-to-date can maximize the value of what you leave your heirs and/or charity, and minimize confusion, resentment and heartache.

The purpose of this blog is to provide general gift, estate, and financial planning information. Always discuss your plans with your attorney, accountant, or financial advisor.

We make it easy to achieve your charitable goals. Let us help you focus on establishing a lasting giving legacy. To learn more, call Karen Minogue at 843-357-4483 or email her at karenm@mywcf.org.