Creating an estate plan is one of the most important steps you can take to protect your family and ensure your wishes are honored. A properly prepared estate plan can explain how your property should be distributed, identify the people you want to make important decisions on your behalf, and provide instructions for what should happen if you become unable to manage your affairs.
However, creating an estate plan is only part of the process. Mistakes in your documents, outdated beneficiary designations, or failing to account for changes in your circumstances can create problems for your family later.
Some estate planning mistakes may result in disputes, unnecessary expenses, delays in administering your estate, or property being distributed differently than you intended. Understanding these common mistakes can help you determine whether your estate plan needs to be reviewed or updated.
Why Estate Planning Mistakes Matter
Estate planning involves more than deciding who should receive your property after you die. Your plan may also address financial decisions, healthcare decisions, guardianship of minor children, trusts, beneficiary designations, and the administration of your estate. When these decisions are not properly coordinated, your family may be left to resolve questions that you could have addressed yourself.
For example, an outdated will may name a former spouse as a beneficiary. A beneficiary designation on a retirement account may conflict with the instructions in your estate planning documents. A poorly drafted trust may not accomplish the purpose for which it was created. These problems can make the administration of an estate more complicated and may lead to disagreements among family members.
Common Estate Planning Mistakes to Avoid
Even a well-intentioned estate plan can contain gaps or oversights that create challenges later for your family. Many of the most common issues arise not from a lack of planning, but from plans that were never updated or were not fully coordinated with other financial documents. The following are some of the most frequent estate planning mistakes individuals should be aware of when reviewing or creating their plan.
Failing to Create an Estate Plan
One of the most significant estate planning mistakes is failing to create an estate plan at all. If you die without a will, Ohio’s intestacy laws determine how certain property is distributed. This may not reflect what you would have wanted for your spouse, children, or other family members.
An estate plan also gives you the opportunity to make decisions that cannot be made through intestacy laws alone. Depending on your circumstances, this may include naming guardians for minor children, establishing trusts, selecting individuals to make financial or healthcare decisions, and making arrangements for the administration of your estate. Creating an estate plan allows you to make these decisions in advance rather than leaving them to your family or the court.
Failing to Update Your Estate Plan
Creating an estate plan does not mean you can put it away permanently and never review it again. Your estate plan should reflect your current circumstances. Marriage, divorce, the birth or adoption of a child, the death of a beneficiary, a significant change in assets, or the purchase or sale of property may all provide a reason to review your documents.
For example, if your will was prepared before you had children, it may not address your current family circumstances. Similarly, a divorce or remarriage may require changes to your estate planning documents and beneficiary designations. Reviewing your estate plan periodically can help ensure it continues to reflect your wishes.
Choosing the Wrong Beneficiaries
Beneficiary designations are an important part of many estate plans. Retirement accounts, life insurance policies, bank accounts, and other assets may pass directly to designated beneficiaries rather than according to the terms of your will. This means that creating a will does not necessarily ensure that all assets are distributed according to its instructions.
Failing to update beneficiary designations can create serious problems. A beneficiary may have died, a family relationship may have changed, or the designated beneficiary may no longer be the person you intend to receive the asset. Your estate planning documents and beneficiary designations should be reviewed together to make sure they work as intended.
Overlooking Jointly Owned Property
The way property is owned can affect how it is transferred after death. Jointly owned property may pass to the surviving owner depending on the type of ownership and the applicable documents. This means that the instructions in your will may not control the distribution of jointly owned property.
Reviewing how your real estate, financial accounts, and other significant assets are titled can help identify potential conflicts before they become a problem for your family.
Creating a Will but Ignoring Trusts
A will is an important estate planning document, but it may not be appropriate as the only component of every estate plan. Depending on your circumstances, a trust may help accomplish goals that a will alone cannot. Trusts can be used for a variety of purposes, including managing property for beneficiaries, providing for certain family members, and potentially avoiding probate for assets properly transferred to the trust.
Whether a trust makes sense depends on your assets, family circumstances, and goals. An estate planning attorney can help you determine what type of plan is appropriate for your situation.
Failing to Plan for Incapacity
Estate planning is not limited to what happens after you die. You should also consider what would happen if you became unable to make financial or healthcare decisions for yourself. Without appropriate documents, your family may have to seek court involvement to obtain the authority to make certain decisions on your behalf.
A durable power of attorney and healthcare-related documents can allow you to designate individuals to make important decisions if you become incapacitated. Planning for incapacity can provide your family with clear instructions and reduce uncertainty during an already difficult situation.
Failing to Properly Execute Estate Planning Documents
Even carefully prepared estate planning documents can create problems if they are not properly executed. Wills and other estate planning documents may have specific signing and witnessing requirements. Failing to follow the applicable requirements can create questions about whether a document is valid or enforceable. Working with an attorney can help ensure that your estate planning documents are properly prepared and executed.
Failing to Consider Taxes and Other Financial Consequences
Estate planning can also involve tax and financial considerations. Depending on the size and structure of an estate, the transfer of property may have tax consequences or create other financial issues for beneficiaries.
Business interests, real estate, retirement accounts, investments, and other significant assets may require additional planning. An estate plan should take your overall financial circumstances into account rather than treating each asset or account separately.
What Happens When an Estate Plan Is Outdated?
An outdated estate plan can create uncertainty for your family and may require additional legal work after your death. For example, an old estate plan may contain provisions for beneficiaries who are no longer living, fail to account for children or grandchildren who were born after the documents were created, or contain instructions that no longer reflect your wishes.
Changes in your assets can also affect your estate plan. Buying or selling real estate, starting or selling a business, receiving an inheritance, or experiencing a significant change in your finances may all warrant a review. Regularly reviewing your estate plan gives you an opportunity to identify these issues while you can still make changes.
Estate Planning Mistakes Can Create Family Disputes
Poorly prepared or outdated estate plans can sometimes contribute to disputes among family members. Questions may arise about whether a will is valid, whether someone had the capacity to create or change an estate plan, whether undue influence occurred, or whether an executor or trustee properly handled estate assets.
Disputes can make the administration of an estate more expensive and time-consuming. In some cases, family members may end up in probate or fiduciary litigation over issues that could have been addressed through clearer planning. A carefully prepared estate plan can help reduce uncertainty and provide your family with clear instructions for handling your affairs.
When Should You Review Your Estate Plan?
There is no single schedule that applies to everyone, but you should consider reviewing your estate plan when there is a significant change in your life or finances.
Common reasons to revisit an estate plan include:
- Marriage or divorce
- Birth or adoption of a child
- Death of a beneficiary or person named in your documents
- Purchasing or selling significant property
- Starting or selling a business
- Receiving a substantial inheritance
- Significant changes in your financial circumstances
- Changes in your health
- Moving to another state
- Changes in your relationships with beneficiaries or the people named to make decisions for you
Even if nothing significant has changed, a periodic review can help determine whether your documents still accomplish your goals.
How an Estate Planning Attorney Can Help
Estate planning involves decisions that can affect you and your family for years to come. An attorney can review your circumstances, explain your options, and help you create documents designed to carry out your wishes.
At Dungan & LeFevre, our estate planning attorneys can assist with wills, trusts, powers of attorney, estate administration, asset preservation, and other aspects of an estate plan.
We can help you:
- Identify potential gaps or problems in your existing estate plan
- Determine whether your will or trust needs to be updated
- Review beneficiary designations and property ownership
- Plan for incapacity
- Establish or update trusts
- Address the needs of minor children and other beneficiaries
- Consider potential tax and financial consequences
- Properly execute your estate planning documents
- Plan for the future administration of your estate
The goal is to create an estate plan that reflects your circumstances and provides clear direction for your family.
Protect Your Family With a Carefully Prepared Estate Plan
Reviewing your estate plan now can help identify potential problems and give you an opportunity to make changes while you are able to do so.
Dungan & LeFevre helps individuals and families in Troy and throughout the Miami County area with estate planning and related legal matters.
Contact our attorneys to discuss your estate planning needs and determine whether your current plan continues to meet your goals.