Effective estate planning can seem straightforward, until you take into consideration that people and life in general can be very unpredictable. This is the second part of a two part article on common mistakes in writing a last will. To read part one click here.
1) Not Keeping Adequate Records | The Scavenger Hunt
Imagine that you are given a list of items that someone hid throughout a forest over a period of 50 or so years. Worst of all, you are expected to retrieve these items! Now imagine that this is what you do to your family! A proper will, without specific records and instructions on the locations and account numbers for your assets, is just plain impolite. Make sure to keep all of this information in one place like a safe, and try to update your records at least annually.
2) Ad Hoc or Do It Yourself Planning
It is frequent, especially with the increased availability of resources on the internet, for people feel empowered to learn and do almost anything. And it is quite possible for the non-attorney to train himself rather well in basic principles of estate law. But serious problems may nevertheless arise because of a lack of expertise. Firstly, laws change from time to time, and the layperson cannot be expected to research and revise his last will whenever the Massachusetts State House chooses to create a law. Second, there are many nuances that the layperson will inevitably miss regarding taxes, the sale of a business, portfolio or real estate in his estate. Such oversights don’t justify saving a couple of hundred dollars, and an experienced Massachusetts estate law attorney will provide you with peace of mind that the plan is created correctly.
3) Wasting of Business Assets
The owner of a business, or an intricate stock portfolio is usually someone who is best equipped to make decisions on the disposition of that asset. As a simple example it would not be wise to sell an ice cream business in the middle of winter. Likewise, granting to your son the shares of 20 companies you happened to research and follow for 30 years without any instructions would make little sense. For these unique types of assets you must provide detailed plans for how the executor should handle the distribution.
4) Life Insurance Planning Mistakes
How to purchase, and pick beneficiaries for, a given life insurance policy is one of the trickier areas of estate planning. The goal is to provide a sum of money to the executor that is outside of the taxable estate and probate and thus immediately accessible for use. Someone who purchased a life insurance policy for himself would cause any beneficiary’s potential benefits to be included in his taxable estate. Often a good strategy is to purchase the required insurance in an irrevocable life insurance trust.
5) Leaving the Wrong Assets to the Wrong Parties
A death at the wrong time (is there ever a right time) can be more disastrous than expected for an estate plan. Most people envision they will die of old age, and that each child will take an equal share of all the assets. But what happens if your death comes much earlier, or worse what happens if your beneficiaries don’t survive you? Having the rule of two in place (2 backups for every beneficiary), and providing for custodial accounts if some of your beneficiaries may not be able to take care of themselves, is an invaluable strategy to protect your family.
Back to part one of How to Write a Last Will.
