It’s never pleasant to think about death or a will but smart preparation for the inevitable event is essential for people of any age.
The size of your estate should dictate the extent of the legal measures you take and the provisions you make to ensure your wealth is properly managed and distributed after your passing. The legal process of dividing up an estate – probate – can be stressful and financially complicated for your heirs to navigate so setting up a comprehensive plan before you die is essential.
If you’re already in the small percentage of people who have created some type of will or estate-planning document, experts say there are some common mistakes that you should review.
- Not Appointing ONE Proper Executor
Your executor will be the one who administers your estate, so choose wisely. Revisit your choice often to ensure they are still able to serve in this capacity (e.g., still of sound mind, in good health, reliable, and readily available). Make sure you designate one clear, specific executor who is wholly in charge, not a pair or a team that might squabble about the specifics of your final wishes.
It’s prudent to then assign one or more alternate executors in a line of succession in the event something unforeseen happens to your first choice. According to moneytalkgo.com, “Naming the ‘wrong’ executor for your Will can throw off your best intentions either due to personality clashes or a lack of ability. Is your executor older than you? Often unreliable? Too busy with their own affairs? You may wish to look for another executor who is more appropriate or use a corporate executor such as your financial institution.”
- Being Vague about Descriptions and Directives
For all physical items you wish to bequeath (e.g., jewelry, furniture, heirlooms, etc.), be very specific and detailed as to what exactly the item is, where it is located, whom you want it to go to, and how you want it done (if applicable). Make sure your descriptions for those items are precise and include important information such as supporting paperwork, certificates, or other ancillary documentation (e.g., a diamond certification, provenance for artwork, the title for a car, etc.).
Having detailed physical descriptions of all your personal stuff, no matter how small, will ensure your executor doesn’t run into issues while dividing up your physical assets. Although it’s important to be specific, remember that you might sell or dispose of that asset designated for a loved one so as trustandwill.com points out, “Review (and update if needed) your Estate Plan every three to five years, or anytime you have a major life event. If you sell a house that was in an original Estate Plan document, be sure to revise it as soon as possible.”
- Forgetting About Assets that Might Fall Outside of the Will
Many assets such as life insurance, pensions, or bank accounts, can be set up to pass directly to the named beneficiary. Since these assets would not be controlled by the will, this is one area where counseling by a financial professional may be wise. If they are included, make sure you give directives regarding all the bank accounts, premium bonds, shares, retirement funds, and any other cash assets you may have. It may be worth thinking about your digital footprint too.
As humangood.org advises, “In the Digital Age, overlooking online assets—banking logins, social media accounts, and email accounts, for instance—is a common blunder. Some of these assets, such as digital photos, might hold financial or sentimental value. Others, like login credentials, could be misused if they fell into the wrong hands.”
- Not Accounting for Debts and Taxes
As the saying goes, “nothing is certain except death and taxes.” And in making a will, you’ll have both at once. When writing your will, you cannot afford to forget about any and all taxes that might be incurred. It’s imperative to periodically review the constantly changing local, state, and federal laws regarding estate tax. For the benefit of your loved ones, consider finding a way to shelter them from a big tax bill by consulting with a professional accountant.
According to legalzoom.com, “One of the most common mistakes people make when they create last wills is assuming that their estates aren’t worth enough to come under the estate tax system. The truth is, even though certain property isn’t in your estate, it still may be taxable. Assets such as life insurance proceeds, trusts, and retirement plans could be included in your estate for tax purposes.”
On top of taxes, take your outstanding debts into consideration – an important duty of your appointed executor is to ensure any legitimate debts are worked out, transferred, or paid before your estate is distributed (e.g., a housing mortgage, a car note, a personal loan, etc.) to avoid hefty legal costs.
- Not Including/Excluding All Intended Beneficiaries
It might seem obvious, but you should always have more than one beneficiary designated for any of your significant assets. In the event that a beneficiary passes away before you do, you’ll want to have a contingent beneficiary – one who would be next in line to your estate or any given asset.
As you consider who will receive your property, remember all of the beneficiaries you may need to mention in your will, including any minor-age children or family and friends who should receive specific items from your estate. If you have biological and/or step-children with a partner, simply saying “my children” in your will may lead to confusion so if you want them included, make sure you explicitly mention them by name.
Additionally, consider your exclusions. According to legalzoom.com, “you should very carefully consider who exactly you want to be named as a beneficiary in your will – if you are intentionally leaving someone out of your will or providing for distribution in an unusual way, you might want to include why you have done this to prevent challenges after your death.”
- Not Routinely Updating Your Will to Reflect Life Changes
As time passes, people quickly forget how significantly their lives and financial standing change. Your will, trust, or life insurance policy might name beneficiaries who have predeceased you. You should review your beneficiary designations on a regular basis to make sure you still name the correct primary and contingent beneficiaries. Take into consideration major life changes such as a new marriage, the birth of a grandchild, or the purchase of a new home, as well as financial issues and business-related income and expenses.
Freewill.com recommends updating your will at least every three to five years or whenever you have a new life event and advises, “If you have a small change to make to your will, you could consider writing a codicil. A codicil is a legal document that amends your last will and testament. It allows you to make small changes to your will without having to rewrite the whole thing.”
- Misplacing the Will or Failing to Leave its Whereabouts
If you should forget the safe place where you hid your will or fail to leave any instructions for your executor on where to locate it, then there’s no point drafting a will in the first place. Whether you place it in the hands of an attorney, lock it away in a safe deposit box or leave it in your top desk drawer, make sure its exact location is known by one or more people in your trusted circle.
As financebuzz.com advises, “A will is an important legal document and you should treat it as such. Put it in a safe place, somewhere an executor will be able to easily get to it if needed. Make sure your attorney has a copy on file and let your potential executor know whom to contact in the event of your death.”
And, remember, your will is one of the most significant documents you will ever draft so give it careful consideration to avoid these common pitfalls, and most importantly of all – Do NOT forget to sign it!
The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not accept any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.
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