The Five Cardinal Sins of Estate Planning: Don’t Be That Person!
Welcome to the wonderful world of estate planning, where good intentions sometimes lead to less than desirable but avoidable mishaps. If you’ve ever chuckled at a comedy of errors, you’ll appreciate this tour of the five cardinal sins of estate planning. With a touch of wit and a nod to those who’ve blundered before, let’s explore how to sidestep these common pitfalls and ensure your legacy is more Downton Abbey than disaster movie.
1. Doing Absolutely Nothing – The Ostrich Approach
First on our list of blunders is the classic “Do Nothing” strategy. If estate planning were a sport, this would be the equivalent of sitting on the sidelines eating popcorn. Here’s a newsflash: doing nothing is still doing something, and that something is leaving a mess for your loved ones. It’s like saying, “Hey family, I love you so much that I’m going to let you sort out my finances, assets, and medical decisions without any guidance. Enjoy the chaos!”
Don’t be that person who thinks they’re immortal or that a Will or Trust is something you deal with “later.” Later often turns into never, and your kids are left with a probate nightmare. Your estate could end up in the hands of the court, and trust me, the court doesn’t know (or care) that Aunt Edna was supposed to get your prized collection of vintage Pez dispensers.
2. Forgetting to Update Beneficiaries – The “Oops, I Did It Again” Mistake
So, you’ve done the responsible thing and named beneficiaries on your accounts. Bravo! But wait, have you updated them lately? If Britney Spears taught us anything, it’s that “Oops, I Did It Again” is not just a catchy tune but also a terrible approach to estate planning.
Let’s say you’ve gone through a divorce, had more kids, or perhaps you’ve had a falling out with your brother, who is still named as the beneficiary on your life insurance. If you don’t update those beneficiary designations, guess what? Your ex or estranged brother could end up with a windfall, while your current loved ones get left in the dust. Update your beneficiaries, people. It’s the adulting thing to do.
3. Not Updating Your Trust with Major Life Events – The Rip Van Winkle Syndrome
Creating a trust is a great step toward protecting your assets and ensuring your wishes are followed. But if you don’t update your trust to reflect major life changes, you might as well have been asleep for 20 years, Rip Van Winkle style. Births, deaths, marriages, divorces, and even the acquisition of significant assets all warrant a review and update of your trust.
Imagine naming your son as the sole trustee of your estate, only for him to move to another country and become unreachable. Or perhaps you’ve remarried, but your trust still leaves everything to your ex-spouse. Yikes! Keeping your trust updated ensures it reflects your current life situation and wishes, not those from a bygone era.
4. Naming Irresponsible Agents – The “They’ll Figure It Out” Folly
Choosing agents to handle your health and financial decisions is a crucial part of estate planning. Yet, many people fall into the trap of naming individuals based on their relationship rather than their ability.
Take the case of a client who named their daughter, a nurse, as their health care proxy. Sounds perfect, right? Except she moved out of state, leaving her siblings in the lurch during a medical crisis. Naming someone who is not available or lacks the responsibility can lead to disaster. It’s like hiring a wedding planner who forgets the wedding date. Just because your child is a nurse doesn’t mean they have the right personality to handle your medical care.
Pick someone reliable, local, and willing to take on the responsibility. Just because someone is family doesn’t mean they’re the best choice. Your irresponsible cousin who still lives in your grandma’s basement probably shouldn’t be in charge of your financial decisions.
5. Naming Co-Agents Who Don’t Get Along – The “Cat Fight” Conundrum
Lastly, the well-meaning but often disastrous decision to name co-agents who can’t stand each other. Picture this: You’ve appointed your two children as co-agents for your healthcare and financial decisions because you don’t want to pick favorites. The problem? They disagree on everything from politics to pizza toppings.
Instead of cooperation, you get conflict. Your medical decisions turn into a battleground, and your financial matters become a tug-of-war. It’s like having two captains trying to steer the ship in opposite directions – you’re bound to hit an iceberg. Choose one agent or, if you must have co-agents, make sure they can work together harmoniously.
In Conclusion
Estate planning isn’t just about having a plan; it’s about having the right plan. Avoiding these five common mistakes can save you and your loved ones a lot of headaches and heartaches. Remember, doing nothing is still doing something – and not in a good way. Update your beneficiaries and trusts regularly, choose responsible agents, and think twice before naming co-agents who can’t see eye to eye.
In the world of estate planning, a little foresight goes a long way. So, put down the popcorn, roll up your sleeves, and get to work. Your future self (and your loved ones) will thank you for it!