As we rapidly approach the end of the year, it’s a good time to do a quick review of your estate plan before the holidays become too distracting. I see many critical problems with old estate plans, but fortunately when folks meet with me, I can correct the mistakes. Speaking of mistakes, here are three important ones that sometimes get overlooked in a lot of estate plans:
- Not Having a Power of Attorney: If you thought having a Last Will & Testament was all you needed for your estate plan, you are not alone. But that does not mean you’re right. Estate planning today also includes having to plan for potential incapacity and long-term care. If you anticipate a time or circumstance where you will not be able to handle your own affairs while you’re living, then you need to have a Power of Attorney. Powers of Attorney are the tools we use to give someone the ability to act on your behalf; to give you an advocate. It’s essential to get this taken care of now because you can’t do it once you’re incapacitated or incompetent. It may not sound pleasant, but it’s much more preferable than having a relative go to a court to seek guardianship over you or to have the courts force an unwilling person to act as your guardian.
- Incomplete Beneficiary Forms: Often overlooked in estate plans, beneficiary forms are the documents used to assign most non-testamentary assets (everything from your retirement accounts to life insurance policies). Most modern estates today have several accounts with beneficiaries already designated. Any account with a beneficiary designation generally does not pass through your will and will therefore not be governed by your will. It’s essential that—just as you should update your will every few years—you regularly review your beneficiary forms to make sure they’re complete and accurate. Place extra emphasis on your retirement assets (IRAs)—if the beneficiaries are blank or incomplete, the account may go through your will. Should that happen, it will be immediately exposed to all of the deferred income taxes. If your beneficiary designations are out of date, the account could go to people no longer in your life. In other words, your heirs could pay a ton of money for your mistake or receive nothing at all.
- Do-It-Yourself Planning: There isn’t much we can’t do online today, including our own estate plans. They tell me that one day soon, I will be replaced by a legal robot. Early retirement, perhaps? But that hasn’t happened yet, and filling out a form on a computer is no substitute for experienced legal advice. Remember, you don’t know what you don’t know. Over the years, I’ve reviewed dozens of do-it-yourself plans and most, if not all, of them have major errors. An estate plan with errors may be worse than having no estate plan at all! Put in the extra effort to see an attorney and do it right.
Having a well-crafted estate plan means that you will leave a positive legacy behind. Don’t leave it to chance. If you’d like to get a review in before the end of the year, call my office now at (215) 706-0200.