One thing about goofing up your own estate plan? You likely will not be around to see the disaster you created.
On the other hand, if you would like to avoid creating problems for your loved ones and your assets after you are gone, then take heed - and take steps now to avoid those problems later.
A recent article in the Financial Post, titled "‘Your grandfather’s dead. It’s my money now': Five estate-planning mistakes to avoid," discusses some commons estate planning mistakes.
Here are it five:
Leaving everything to someone with private instructions to donate to charity. Hmmmm. I think you can see the problem with this strategy. It is just human nature. So, even though your son promised he would make a donation to your old fraternity, there is no guarantee he will follow through after you are gone. Teaching point: If there is a charity you want to benefit as part of your estate, then spell it out in your will. Alternatively, make the distribution from your retirement funds by a simple beneficiary designation. Added benefit: Unlike your loved ones, your fraternity educational foundation (if IRS-approved) will not pay any income taxes on the distribution.
Create your will based on today’s situation and forget it. Not good. The original article advises you to plan ahead and review your will regularly. The only certainty beyond death and taxes is change itself. Reviewing and updating your estate plan as changes occur is essential. In our practice, we recommend a review every two years. Think of it as a "physical exam" for your estate plan.
Give up control of your finances to your children. Simply put, if you give up control, you may not get it back. For additional background reading, check out King Lear by William Shakespeare. It is one of my favorite estate planning tales.
Expect your children to give some of their inheritance to your grandchildren. Most grandparents proclaim that had they known how fun grandchildren would be, then they would have had grandchildren first! Unfortunately, it is quite possible that assets left to your children will never make it to your grandchildren. You can avoid this by leaving something to your grandchildren in trust as part of your estate or consider giving them money while you are still around.
Trust a homemade will. If you have made your own will, then you may have "issues" (legal and otherwise) ... especially if you have used an online service or have downloaded the will form from the internet. Yes, you may be able to DIY many items on your honey-do list around the house. However, do you really want to be your own lawyer when it comes to legal planning to protect everyone you love and everything you have after you are gone?
Be sure to read the original article, then if you have 10 minutes to invest toward your estate planning education, then watch my "Top Ten Fatal Estate Planning Mistakes" on-demand webinar.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
Reference: Financial Post (October 29, 2014) "‘Your grandfather’s dead. It’s my money now': Five estate-planning mistakes to avoid"
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