You probably know who you are going to leave Grandma’s pie plate to. You might even have plans for the grandchildren to have the summer cabin. But none of that matters if you haven’t take some proper steps to inform others of your intentions. The number one reason that most people die without having proper planning is that they haven’t gotten around to it. Here are the seven largest mistakes people make when they are planning for death or incapacity.
- Failing to plan. Benjamin Franklin once said, “If you fail to plan, you are planning to fail!” Unfortunately, more than half of all Americans between the ages of 55 and 64 don’t have Wills, a condition known in the legal realm as intestate. One article called the typical American estate plan the “Ostrich approach to estate planning.” Some people erroneously believe that dying without a Will means the government gets your assets. That’s not necessarily the case (unless you have no living relatives) but who gets your assets gets determined by the laws of the state rather than you. If you live in Washington, who gets what is determined by whether or not you have living children, parents or other close relatives when you die. Generally speaking, your spouse (if you have one) receives a portion of your estate and then the other members of your family (if you have one) will receive portions. Without a Will, you’ll have no control over who will provide care for any dependent children and no way to indicate who should act in your stead in case you become incapacitated.
- Doing it yourself. Americans have bought into the DIY culture. Being able to Google just about anything means that we often presume a level of competence that may not exist. Just as you might not wish to take on the task of completely reroofing your home, you might not want to take on the task of being your own lawyer in case you screw it up because fixing a problem after you’ve created it is usually far more time consuming and costly than doing it right the first time. Before considering being your own lawyer, decide how much risk you’re willing to take and whether you’re prepared to handle the consequences. Lawyers attend three years of school or more and then spend a lot of time learning the trade. That time and education helps train them to spot potential problems that might not be so readily apparent to the less initiated.
- Not planning for disability. Nearly 20 percent of noninstitutionalized Americans have a disability according to the National Institute on Disability and Rehabilitation. Over half of Americans over the age of 65 have a disability and almost 40 percent have an activity limitation. If you don’t plan for disability the government will do so for you. For instance, if you can no longer care for your own needs, a court will appoint a conservator over you. It’s important therefore to take the time to create your Powers of Attorney and Health Care Directive so that you choose who has access to your personal information rather than the courts.
- Failing to fund a trust. Creating a trust is the first step in having a trust in your estate planning documents. If you create one, you must fund the trust—by retitling the assets in the trust’s name. A trust can be an effective way to manage assets should you become incapacitated or die. However, a trust must be funded to ensure your assets are in the trust should something happen. This might also include checking to make sure that beneficiary designations on some financial assets are also changed.
- Not checking beneficiary designations. Retirement accounts and insurance policies rely on beneficiary designations to determine who will inherit them after your death. Because those beneficiary designations supersede decisions handled by the Will it’s important that you don’t inadvertently provided a spouse from a previous marriage with benefits that the Will cannot undue. If you’ve recently divorced, married, had a spouse die or any number of other life changing events, you might think that you’ve got enough on your plate but if any of those things happened and you didn’t change your beneficiary listing appropriately you may not be leaving things the way you want.
- Not reviewing the plan. Once you think you’ve got everything in place, you need to check in on it every once in a while. If something major happens such as a birth, marriage or death, you should automatically be looking at whether you need to make changes to any of your estate planning documents.
- Not having a family meeting. This step often gets overlooked but if you are expecting your children to play roles as executor or Powers of Attorney or if you just want them to know where the Will or other important documents are kept, you need to consider having a family meeting. Because the topic of death is often difficult for loved ones to address, it is often a good idea to incorporate a professional such as a lawyer to help address concerns.