The Titanic didn’t have enough lifeboats for all its passengers because the ship was “unsinkable.” The Mars orbiter was lost because some engineers used the metric system while others used the English system. Decca Records turned down the Beatles because they weren’t sellable. No mistake you make will ever be a bad as these historic disasters, but just to be on the safe side, check out this list of the four biggest estate planning mistakes people make, and some tips on how to avoid them.
1. Not making any plans.
The biggest estate planning mistake people make is not making any sort of plan at all. Even if you don’t have a lot of assets, you should still consider drafting a basic plan that includes a living will. A living will, also known as an advance directive or healthcare power of attorney document, tells your healthcare providers how you want to be cared for if you cannot tell them yourself, and may give the power to direct your care to someone else.
2. Not telling others about your plans.
If you do not tell your family and close friends at least a few things about your estate plan, they may not know that you have one. By the time someone finds a copy of your plan, it may no longer be possible to carry it out the way you intended.
The most important person to talk with about your plan is the person you hope will serve as your estate administrator. You do not want the person you expect to carry out your last wishes to be surprised that they have been offered that job. Ask him or her if they are willing to serve, and explain exactly what that will entail. If you or they have any questions about the required tasks, talk with your attorney to make sure everyone has an accurate idea of what will be expected of them.
3. Waiting until you are dead to start giving assets to others.
This is really a two-fold mistake. The first mistake applies if you have a large estate, or if you will need to spend down in order to qualify for government assistance, and that is not gifting assets to those you want to benefit from your estate. When gifting is done properly, it can reduce your tax burden or put you in a position where you are financially eligible for government assistance.
The second mistake relates more to objects rather than wealth. We suggest all our clients start passing cherished objects on to the people they ultimately want to inherit them sooner rather than later. Including specific bequests in your will, like “the painting in the hallway is to go to my grand-niece Elvira” often cause trouble. Sometimes the object in question can’t be found, and other times a dispute arises between family members because “dad knew his baseball cards were more important to me than my brother.” It is much easier to pass items on while you are available to explain their importance and why you are giving them to one person and not another. As an added bonus, many clients tell us they really bonded with their loved ones over the items they passed on.
4. Working with an attorney who is not an estate planning specialist.
There is no way to say this without sounding self-serving, but working with an attorney that is an estate planning specialist is a must. The attorney who helped you buy a house or settled your claims after an auto accident is probably great at what they do, but they might not know anything about estate planning. Just like doctors specialize in different areas, so too do attorneys. Make sure you are working with an attorney that knows exactly how to do what you need them to do without guessing and testing.