No one wants to think about death or taxes, but these are facts of life. Here are five common errors many of us make (all of which are easily avoided).
- Failing To Have A Plan. Recent estimates are that 70% of Americans have no estate plan at all. None. No will, no trust, no power of attorney, no health care directive. Do they think they will never die? Is the thought of their death so unthinkable that they are willing to put their family at tremendous risk? The state has a default plan for these non-planners, but it is almost never what people would choose for themselves, is expensive and creates many problems, all of which are completely avoidable by planning ahead.
- The DIY Estate Plan. Many foolishly try to save a buck and do their planning on their own through handwritten wills, DIY software or online programs, or relying on joint tenancy of assets. You don’t know what you don’t know and these techniques are fraught with peril. Warren Burger, former Chief Justice of the United States, wrote his own 176 word Will and ended up costing his heirs $450,000 in avoidable estate taxes and fees. Ouch.
- Failing To Update. Life and the law move on after you create estate planning documents and those documents must be updated periodically to reflect changing life events and changes in the law. And yet, very few are. Marriage, divorce, the birth of children or grandchildren, and the list goes on and on. In the last fifteen years, estate tax laws have gone through seismic shifts. All of these changes demand a visit to your lawyer, even just to verify that things are still in good shape.
- Not Communicating. Many of us believe our estate plan should remain a closely guarded secret until we die. There are good reasons for confidentiality but failing to even discuss your intentions with loved ones dramatically increases the chances of hurt feelings, family fights or lawsuits after you are gone. Talking about what you want with your loved ones, not just with your lawyer, might be uncomfortable but is highly advisable.
- Forgetting About Incapacity. While death and taxes are the only guarantees in life, incapacity is rapidly climbing the list. Many of us will, at some point in our life, be unable to make financial or healthcare decisions, either temporarily (coma) or permanently (dementia, Alzheimer’s). Failing to plan for this subjects you, your money and your family to tremendous risk — risk which can be easily managed by consulting with a professional now, before it’s too late.