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D’Oh! Five Ways to Seriously Mess Up Your Estate Plan

And How to Avoid Them

D’Oh! Five Ways to Seriously Mess Up Your Estate Plan

If financial security and peace of mind for your nearest and dearest is your priority, it’s essential that you maintain a valid and up to date estate plan.

Even a small mistake can cause major headaches for your family when the time comes, and sometimes those mistakes can be irreparable. Many of the most damaging errors can easily be avoided by keeping your estate plan under review and making sure it’s up to date. Here are five errors that come up all too often:

Forgetting to Update Your Beneficiaries

Every family experiences births death and marriages over the years, and every such event can change who will inherit your assets from you.  For example:

Marriage invalidates a Will. Before the ink is even dry n your marriage certificate, your existing Will no longer has any effect and you’ll be intestate.  Whether you're a long-established couple taking a belated trip down the aisle, or you're taking the plunge again after divorce or bereavement, the effect is the same.  

So, it’s important to get advice from an estate planner, to find out exactly how your decision to marry affects the way your assets will be inherited. Then you can make conscious choices to ensure your family will still be provide for exactly as you wish. Do it as soon as possible, for certainty and peace of mind. You can even do it as part of the process of planning your wedding, by making a “Will in Contemplation of Marriage”.

Expanding your family with a new baby or a new grandchild is another joyful event that should trigger a review of your estate plan. If you’ve provided for children and grandchildren specifically by name in your Will, new arrivals in the family circle will be excluded unless you update your Will to take account of the patter of tiny feet. It’s often preferable that you provide for your children or grandchildren as a group rather than by name. This introduces an element of future-proofing, so that you don't have to get your Will re-written every time a new baby is born.

If you’re becoming parents for the first time, or even if your celebrating the birth of your second or subsequent baby, it’s important to consider whether your estate plan is robust enough to provide for their welfare and financial security if tragedy strikes. Have you nominated guardians to take care of the children if something happens to you? Have you nominated trusted executors who will handle the children’s inheritance until they are old enough to stand on their own two feet? Have you bought as much life insurance cover as you can afford?

It’s not just happy events that should trigger a review. The death of a close family member can have a dramatic effect on the way your own assets will eventually be passed on, particularly the death of a spouse. Your estate plan is probably the last thing you’ll want to consider at such a terrible time. But when you do eventually feel up to it, make it a priority to find out, with the help of a professional estate planner, whether your current estate plan is still fit for purpose.

It’s not just the beneficiaries of your Will you need to consider. You also need to look at the beneficiaries of your pension and your life insurance. A good financial advisor will check in with you annually to review your overall financial plan. That yearly review is the perfect opportunity for you to update your pension and insurance beneficiaries to reflect changes to the composition of your family.

Only Focusing on Inheritance

It's tempting, when considering your estate plan, to focus only on how to provide for your family in the event of your death. While that’s a laudable intention, you’re leaving the job half done if you stop there. Statistically, we can expect to live well into our eighties and beyond, but with extended life expectancy comes the greater risk of ill-health and incapacity in later life. And sadly, none of us is immune to the risk of sudden, catastrophic illness or injury at any time of life.

The day to day consequences of incapacity can be dramatic and far-reaching for those closest to you. They may need to make practical arrangements for you, such as sorting out your financial affairs, or there may be important decisions to be made about how you will be cared for.

If you haven’t planned for this in advance by making your Lasting Powers of Attorney, it’s your family who’ll suffer. They’ll have to apply to the Court of Protection for permission to handle your finances for you, which is an expensive and stressful court process taking months to resolve. They’ll also have to defer to doctors and social workers who’ll make “best interests” decisions about how you’re to be looked after.

So, do them the courtesy of making and registering your Lasting Powers of Attorney. One day your family may be eternally grateful that you did it.  

Poor Recordkeeping 

One day, the people you love will have to put your affairs in order, whether because of your death or because of your incapacity. There are few things they’ll hate more than spending endless hours tracking down and organising your assets without you there to tell them where to look.

So, leave them a letter of instruction explaining exactly what you have, who to contact and what to do. Tell them where your Will and Powers of Attorney are stored and give them the contact details of the key professionals such as your financial advisor, estate planner, bank manager, etc. And while you’re at it, don't forget your digital legacy – make sure you’ve listed the login information for every relevant online resource.

Poor Communication 

Every contested probate case I've ever come across has had two things in common. First, the most horrible bitterness, with once-close family members engaged in all-out warfare. Second, atrocious communication – the person who made the fought-over Will never worked up the courage to have an open discussion with their family about their decisions concerning later life and inheritance.

Dodging the issue – or, far worse, giving the impression that you’ll do one thing and failing to carry that through in your estate plan – is a sure-fire way to cause hurt feelings, broken family relationships, and even, in some cases, vast sums wasted on litigation.

Of course, your estate plan is not exactly pleasant dinner-table conversation. But if you can overcome your awkwardness and have a serious talk with your family, it will pay dividends in the long run. However, there may be overwhelming reasons not to open this particular can of worms with your family. Sibling rivalries and challenging stepfamily relationships may make such a conversation a powder-keg you’d rather not ignite. If so, at the very least write a personal letter to each affected family member, to be opened in the event of your death, explaining what you're looking to achieve with your estate plan, and why. This may go a long way towards preventing conflict from escalating out of control, even though it carries no legal authority.

Burying Your Head in The Sand

Failing to make an estate plan at all is the most obvious, and common, of the five errors. Roughly 60% of us haven't got around to making our estate plan. We’re too busy. We’re too intimidated by legal stuff. We’re too squeamish. We’re too young and fit – i.e. we're immortal and immune to all serious illness and injury, right? Browse this blog and you’ll find plenty of real-life examples of people who dodged making their estate plan for exactly those “reasons” and consequently left their families in a terrible mess.

So, the bottom line is: make the time, pluck up the courage and get some professional advice about the choices available to you. Once you’ve picked up the phone and taken that first step of talking to an estate planner, it all gets easier. From a sympathetic conversation in the privacy of your own home and a clear written summary of your options, you’ll be able to make informed decisions with confidence. Once you’ve had your documents drawn up, registered and stored, you can forget all about it, safe in the knowledge that you’ve done your best for the people you love - for now...

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