Most young families I speak to, including my friends, are truly intimidated by Estate Planning. That's usually for one of the four following reasons: (1) they say they don't know enough about the subjects, (2) they don't know how to do it, (3) they don't have the time to focus on it and want to do it later, or (4) as discussed last week, the topics of estate planning like aging, death, or disability frighten them to the point where they don't want to confront what they know they must
In response to reason Number 1, that's partly why I created this firm and write these blogs. I want to educate and empower families to make the best legal and life decisions for their families, so they live life without wondering what would happen if "something" happened to them.
In response to Number 2, the education will help people figure out whether they are looking to establish a relationship with a trusted attorney who can be there for them, or whether they are looking for a document drafting service like LegalZoom®, Rocket Lawyer®, and Trustandwill.com, which often misleads people into thinking that estate planning is a DIY affair, which involves nothing more than filling out the right legal forms which usually leave mistakes that don't get uncovered until you are gone.
In response to Number 3, I have young kids and run a business. I get it. Time is valuable. That's why our Three Step Meeting Process starts with a Family Wealth Planning Session, where we work together and apply your unique life circumstances to the law and identify the precise changes that need to made when building your plan.
In response to Number 4, only you can make the choice to face the reality that one day, you will die. We don't know when, and we don't know how, but by facing the subjects with a new attitude, we can set our families up to live a meaningful life and cement our legacy for generations to come.
Last week in part one, we highlighted the first five most common estate-planning mistakes your family can't afford to make, and here, we wrap up the list with the remaining five mistakes.
6. Not Updating Beneficiary Designations
In addition to reviewing and updating your core estate planning documents like your will, trust, and power of attorney, it’s crucial that you also update the documentation for your other assets, especially those with beneficiary designations. Some of your most valuable assets, like 401(k)s, IRAs, and life insurance policies, do not transfer via a will or trust.
Instead, these assets have beneficiary designations that allow you to name the person (or persons) you’d like to inherit the asset upon your death. Oftentimes, people forget to change their beneficiary designations to match their estate planning goals, which can lead to disaster. For example, if you get remarried and forget to update your 401(k), your ex-spouse from 20 years ago could end up inheriting your retirement savings.
Additionally, some people assume that because they’ve named a specific heir as the beneficiary of their IRA in their will or trust that there’s no need to list the same person again as beneficiary in their IRA paperwork. Because of this, they leave the IRA beneficiary form blank or list “my estate” as the beneficiary. But this is a critical error—and one that can lead to serious complications and expense for your loved ones. It makes no difference who is listed as the beneficiary in your will or trust; you must list the person you want to inherit the asset in the beneficiary designation, or your heirs will have to go to court to claim the asset.
And you should never name a minor child as a beneficiary of your life insurance or retirement accounts, even as the secondary beneficiary. If a child inherits assets, the assets become subject to control of the court until they reach the age of 18, and then, the assets are distributed outright without any protection or direction. Estate planning offers better solutions!
If you want a minor to inherit assets, you can create a special trust to hold the asset until the child comes of age, and name someone you trust to serve as a successor trustee to manage the assets until that time. As your family's trusted attorney, we can support you to choose the appropriate trust for this purpose to ensure your child gets the maximum benefit from their inheritance.
7. Improper Execution You could have the best estate planning documents in the world, but if you fail to sign them, or sign them improperly, they will fail. This might seem trivial, it happens all the time. A loved one dies, their family brings their estate planning documents to the attorney, and the attorney can’t help them because the documents were either not signed or were signed improperly (aka, didn't follow the legal formalities set forth in NYS law).
To be considered legally valid, certain estate planning documents like wills must be executed (i.e. signed, witnessed, and/or notarized) following very strict legal procedures. For example, many states require that you and every witness to your will must sign it in the presence of one another. If your DIY service doesn't mention that condition (or you don’t read the fine print) and you fail to follow this procedure, the document can end up worthless.
8. Choosing The Wrong Executors Or Trustees In addition to laws regarding execution, state laws are also very specific about who can serve in certain roles like executor, trustee, or financial power of attorney. In some states, for instance, the executor of your will must either be a family member or an in-law, and if not, the person you choose must live in the state. If your chosen executor doesn’t meet those requirements, he or she cannot serve.
Moreover, some states require the person you name as your executor to get a bond, which is like an insurance policy before he or she can serve. Such bonds can be difficult to get for someone who has a less-than-stellar credit score. If your executor cannot get a bond, it would be up to the court to appoint your executor, which could end up being someone you would never want managing your assets or a third-party professional, who could drain your estate with costly fees.
During our Family Wealth Planning Session, we will guide you to choose the most appropriate and qualified executors and/or trustees to manage your estate and assets.
9. Unintended Conflict Between Family Members Family dynamics are—to put it lightly—complex. This is particularly true for blended families, where spouses have children from previous relationships. If you try to go it alone using a DIY document service, you won’t be able to consider all of the potential areas where conflict might arise among your family members and plan ahead to avoid such disputes. After all, even the best set of documents will be unable to anticipate and navigate these complex emotional matters—but we can.
Every day families end up in lifelong conflict due to poor estate planning. It's happened in my own family when my grandparents passed away. Yet, it is possible for families to be brought closer together as a result of handling these matters the right way. When done right, the estate planning process is actually a major opportunity to build new connections within your family, and our firm has specifically trained to help you with that.
In fact, preventing family conflict with proactive estate planning is our special sauce and one of the many reasons to work with us, rather than relying on DIY planning documents, which will not identify nor prevent unforeseen family disputes.
10. Failing To Properly Name Guardians For Minor Children This is a big one for us.
If you are a mom or dad with children under the age of 18 at home, your number-one estate planning priority should be selecting and legally documenting both long AND short-term guardians for your kids. Guardians are the people legally named to care for your children in the event something happens to you.
If you haven't named guardians for your kids yet, contact us so we can help you take care of this critical task right now. And, if you’ve named guardians for your minor children in your will—even with the help of another lawyer—your kids could still be at risk of being taken into the care of strangers because almost every plan we review fails to consider what would happen in the short term if you die, or what would happen if you became permanently disabled or incapacitated.
For instance, if you’ve named guardians for your kids in your will, what would happen if you became incapacitated and were no longer able to care for them? Did you know that your will only becomes operative in the event of your death, and it would do nothing to protect your children in the event of your incapacity?
Or perhaps the guardians you named in your will live far from your home, so it would take them several days to get there. If you haven’t made legally-binding arrangements for the immediate care of your children, it’s highly likely that they will be placed with the authorities until those guardians arrive. These days, law enforcement cannot take a chance on leaving minors with someone who is not legally allowed to care for minor children.
And does anyone even know where you will is located and how to access it? How can they prove they are your children’s legal guardians if they can’t even find your estate plan? If you worked with another lawyer to prepare your will and they didn't answer these questions in advance, call them right now and demand an answer. Or contact us for a complimentary review and ask us what we can do to fix it for you.
These are just a few of the potential complications that can arise when naming legal guardians for your kids, whether in your will or as a stand-alone measure. And if just one of these contingencies were to occur, your children would more than likely be placed into the care of strangers. Sadly, this happen even to those parents who’ve worked with lawyers to name legal guardians for their children, and that’s because most lawyers simply don’t know what’s necessary for planning and ensuring the well-being and care of minor children.
This is one thing that makes our firm so different. We take tremendous pride in the systems we have to protect your children God forbid something ever happens to you.
So, that wraps up the Top 10 Estate Planning Mistakes Your Family Can't Afford To Make. If you want to take control of your Life & Legacy Planning to do right by those you love most, contact us today and schedule your Family Wealth Planning Session.
During this initial meeting, we’ll take you through an analysis of your assets, what’s most important to you, and what will happen to your loved ones when you die or if you become incapacitated.
If, as a result of this process, we determine that you really do have a very simple situation and you want to create your own estate planning documents yourself online, we will support you to do that. However, if as a result of the process, you decide you would like us to create a plan for you, we’ll support you to find the optimal level of planning for a price that’s right for you.
And if you’ve already created an estate plan—whether it’s a DIY job or one created with another lawyer’s help—contact us to schedule an Estate Plan Review & Check-Up. With our support, we will ensure your plan is not only properly drafted and updated, but that it has all of the protections in place to prevent your children from ever being placed in the care of strangers or anyone you’d never want raising them.
In either case, working with us will empower you to feel 100% confident that you have the right combination of estate planning solutions to fit with your unique asset profile, family dynamics, and budget.
At Soundview Law Group, P.C. we see estate planning as far more than simply planning for your death and passing on your “estate” and assets to your loved ones—it’s about planning for a life you love and a legacy worth leaving by the choices you make today. Contact us today to get your plan started.
We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That's why we offer a Family Wealth Planning Session, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.