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8 Common Legacy Planning Mistakes

Updated: Nov 14, 2018



We’ve been around the block a few times when it comes to planning a client’s legacy. We've found many things that complicate the process or lead to issues that can otherwise have been avoided.

Here’s 8 of the big ones.

1. Leaving your plans to float in deep space.

If something happens to you, does your family know where your estate planning documents are located?

We find that a lot of the time, people don’t communicate this to their family or friends. Even if they do, the documents rarely contain the most useful information- important contacts, list of accounts, passwords, etc.

After experiencing clients drudge through sorting out affairs in their time of grief, we now strongly recommend a formal or informal personal document locator & information locator.

There’s no use to making an estate plan if no one can find the pieces to execute it.

2. Assigning the wrong person for the job.

There are several roles to fill when you create your estate plan, one of the biggest mistakes people make is not considering the responsibilities of the roles when naming their “people.”

Guardians, Executors, Trustees, Personal Representatives, Conservators, Health Care Proxies, Power of Attorney. You need to understand these roles & decide who in your life would be best suited to fill them.

You trust your sister to take excellent care of your children, but she’s very financially disorganized. Is she the right person to also take care of the money you leave them?

You automatically name your eldest child as your executor. Do they know the role before them? Will the choice cause issues among the other children?

Maybe you have no children. Who would you feel comfortable stepping in and making decisions on your behalf? If you don’t make this decision, the court decides for you.

3. Thinking the only thing cared about is your money.

Many people do not give a second thought to that watch they always wear, or that special pair of earrings. Monetary value or not, this is the stuff that fuels fires within families.

So, instead of hurt feelings and WWIII- consider what items you’d want to pass to your heirs. Heck, even have a conversation about it while your still around!

When people know what you are giving them and why, it might diffuse the emotional sparring. Here are a few tips:

  • Give it to them while you are still living!

  • Made a note separate of your will that your lawyer keeps.

  • Make an album of things you own and label them with names.

  • Consider mentioning WHY someone is not receiving something over someone else.

Dealing with this sort of family throw down? Here’s a few ideas to decide fairly:

  • Divide items into value groups, draw from a hat.

  • Pick numbers, and then choose items in order.

  • Express feelings and allow trades if desired.

4. Ignoring your digital assets.

Let’s face it, we live in a digital age. Incorporating your digital assets into an estate plan is not something that’s been discussed in the past. It’s creating new and complex challenges for those who aren’t warned to PLAN AHEAD.

We aren’t just talking about bitcoin here- we are referring to the myriad of memories and important information in the cloud, on your phone, in your email, on your social media accounts and a dozen other places!

What if your family couldn’t access those photos after you were gone? What if you were incapacitated and all of a sudden someone had to help pay your bills- do you get paperless statements? How would they log into your accounts?

5. Failing to Realize why we all can’t Just Get Along.

Family relationships can be complicated. Add on the feelings associated with your passing or incapacitation, and things can get messy.

We particularly stumble across this in two ways:

  • You don’t consider complicated relationships between your heirs. A family member that’s by your side every day helping you in your difficulties may feel more deserved than their never-around brother.

  • You don’t think about equalizing properly. Maybe you divide each asset equally among your nieces and nephews, but never thought about that loan you gave your niece to help start her business. Do they end up hurt because you gave her more?

When these sorts of things happen, people end up feeling wronged and relationships fall apart. Save your heirs the trouble by carefully considering your choices and impact beforehand.

6. Taking your new estate plan & putting it in a drawer.

TOO MANY TIMES we have had people into our office that have executed excellent estate plans but failed to update their accounts to match these strategies. Without the follow-through, even the best laid plans are pointless.

Additionally, consult ALL of your team when you are creating that strategy. Your lawyer may be able to come up with the best way to achieve your wishes. However, there might be something you hadn’t brought up or considered about your assets or tax status that could have made a difference.

Finally, REVIEW! Consistently, and especially when you go through big life events (for example: divorce - a good time to update those bene’s!)

7. Not paying attention to the Tax Code.

Different assets have different rules when it comes to how they must be distributed and taxed. While you might know better than leaving your estate as your IRA beneficiary, there are also special considerations to be made when designating a trust as a beneficiary of an IRA.

Inherited IRA money, when distributed, is treated as income to a beneficiary. If you don’t consider all the rules, it’s possible beneficiaries may need to accelerate the rate at which they distribute these funds - which can cause a major tax pain.

Also- think about this, maybe giving that IRA to your favorite niece & the rest to charity wasn’t the smartest thing you could have done. If you had switched it around the charity wouldn’t have had to pay income taxes like your niece did.

8. Allowing probate court to figure it out for you.

Probate is the legal process you must go through to distribute assets that aren’t passed by contract or operation of law. It’s where your will is used to determine the asset’s distribution (unless you die without a will- a whole new headache!)

The probate court process can be expensive and very time consuming for your family. The property in question remains in limbo during this whole process, and the inheritance you meant for them consumed by court and lawyer fees. Not to mention this all happens on public record.

Do your heirs a favor and pass your assets in other ways as much as you possibly can. AVOID PROBATE. Or at least, make sure you aren’t putting them through TWO probate processes, which happens if you own property in more than one state. AYE!

The point?

There are a lot of nuances when it comes to Estate & Legacy Planning.

Want to make sure you’ve got your bases covered?

Want to prepare yourself for what you may end up going through with family?

#LifeonPupose #LegacyPlanning #EstatePlanning