5 Common Estate Planning Mistakes People Make

Shakira
Post : December 24, 2022

Estate planning is an important process that helps individuals and families decide how to manage and distribute their assets during life and after death. However, it can be a complex area of law, and it is not uncommon for people to make mistakes that can have significant consequences. 

These mistakes can lead to tax bills, reduced benefits, invalid wills, and money going to unintended recipients. By being informed and proactive, it is possible to avoid these common estate planning mistakes and ensure that your wishes are carried out according to your desires. 

This guide will explore some of the most common mistakes people make regarding estate planning and how to avoid them.

What are the 5 common estate planning mistakes people make?

Failing to plan

When it comes to estate planning, one of the biggest mistakes one can possibly make is not taking the time to plan it well. The documents of a well-prepared estate planning help to maximise your estate value. Unintended mistakes can often prevent you from reaching your goals in estate planning. 

Your final affairs will be left to be managed by your close ones even if you have the documents of estate planning in place, but the most serious mistake of estate planning is not having a plan. 

A legally valid will provides your dear ones with proper guidance to handle your affairs. It will help to bring peace of mind to them at times of uncertainty, knowing that there is an estate plan in place.  

If you do not prioritise your estate plan, you risk the future of your estate and your loved ones. To avoid this mistake, take the time to sit down and get started on a proper estate plan. 

Does not have a will

This is the most common estate planning mistake a person could make. If you don't have a will, then it's time you make one as soon as possible. If you don't, your estate will be distributed according to the government's laws. 

If you do have a will, you should keep in mind to review it regularly. This common yet dreadful mistake can cause your hard-earned wealth and life savings to end up in the hands of the state government.

Outdated wills

Taking the first step to draft an initial estate plan is huge but failing to update your plan is one of the worst mistakes you can make.

Estate planning documents cannot be simply set and forgotten about if you made a will many years ago and haven't touched it since then. There is a high chance that your will is out of date. 

They should be reviewed every couple of years as your family and life change. 

Some of the key events for revising your will includes: 

  • Marital status - entering or leaving a marriage
  • Starting a family - birth of a child
  • Purchasing a new home or relocation if you move out of state
  • Starting a new business
  • Death of a beneficiary
  • Death of your child's guardian
  • Establishing companies or trusts
  • Gifts to charities and changes to adult beneficiaries' health or financial status. 

Update the will as often as required. The best practice is to have it updated every five to seven years. 

You may need to update your estate plan periodically because the assets you own are worth more now than they were earlier, and you may also want to change beneficiaries. 

Not appointing an appropriate executor

Since it can be a major undertaking to administer an estate, you will want an honest and competent executor. 

Usually, the surviving spouse, who is the sole beneficiary, will be the obvious choice for an executor. What if the surviving spouse is unable to manage the complex process of a large estate with a lack of understanding of investments, finances and tax laws?

These are times when the spouse will not be the right executor and also at times when they disagree with the decisions you make regarding the bequests and beneficiaries. 

If you are concerned that they will not fulfil the terms of your will and not act responsibly as an executor, you can appoint an appropriate executor who can be trusted to fulfil their duties correctly.

It is also necessary to nominate an alternative executor in case your spouse dies before you. It can be one of your children or a relative. This does not necessarily have to be a beneficiary. 

Make sure to tell the person you nominate that they are an executor and also provide them with the necessary information regarding the location of the original will and contact details of your lawyer, financial planner and accountant. 

Choosing the wrong person to handle your estate can be a major mistake in estate planning. 

Not discussing with those involved

Another common mistake in estate planning is keeping your plan a secret. Many people are in the habit of not discussing their estate plans with the ones involved. 

Discussing with those involved and keeping everyone informed will reduce confusion and provide clear guidance on how you want your assets to be handled. 

It's a good idea to set aside some time to have a brief conversation about your estate plan with your family and friends, especially with those involved, such as the ones you have named as executor or trustee and the people you name in your will or trust. 

Avoiding this common mistake helps to ensure that there will be no disagreements and disputes between them after your passing. This is just like involving some experts on home loans before taking a home loan for your next house. 

Conclusion

This guide will help you avoid the most common estate planning mistakes and secure your legacy. 

Avoid these mistakes and set up your estate plan the right way, drafted according to your specific needs. Make sure to seek expert advice when necessary. 

The benefit of consulting a professional and seeking advice is that they will guide you through creating the perfect plan that addresses all of your needs and avoid mistakes in estate planning. 

 

Latest Blogs

May 25, 2024

Superannuation and Retirement Planning in Australia

Superannuation is a pivotal element of retirement planning in Australia, designed to provide financial security for retirees. This compulsory scheme mandates that employers contribute a portion of their employees' earnings into superannuation accounts, fostering a culture of savings and investment that benefits individuals and the broader economy. Despite its strengths, the superannuation system faces several […]

May 24, 2024

Islamic and Behavioral Economics Guidance on Home Buying

Purchasing a home is one of the most significant decisions we make in our lives, involving not only financial considerations but also deep emotional and cognitive involvements. Drawing from the behavioural insights in Daniel Kahneman's Thinking, Fast and Slow, and deeply rooted Islamic teachings, this blog post offers a personalised exploration of how to navigate […]

1 2 3 67
CALL NOW ENQUIRE NOW