These top five estate-planning mistakes earn that ‘honour’ because they are not only the most common mistakes, they also have some of the most devastating consequences.
Putting off making a start. It is never too early to commence your planning. But it can be too late. Why? In some cases people need a long lead time to arrange their affairs so that their assets are in the best structures to ensure that on passing away, their assets go to the right people with the minimum of fuss and tax payable. In other cases it is simply to avoid the risk of losing mental capacity through accident or aging leaving it too late.
2. Not understanding what happens to assets on death
A will only controls assets that form part of your deceased estate. There are many assets that may by-pass your estate and won’t be controlled by your will. These might include: superannuation death benefits, life insurance proceeds, jointly owned assets, funds in joint accounts and assets held in trusts. Many people prepare a will without considering these issues and their assets don’t end up where they wish. Again, the best time to consider these assets is when you create them, not after they have been in place for decades as it can be difficult and costly to make changes to ensure assets end up in the hands of the right beneficiaries.
3. Don’t surprise people
Communication, communication, communication. Many disputes arise because the person preparing their will doesn’t communicate with the family the will affects. There may be a good reason why you nominate one child over others as your executor, or why you leave a larger gift to one person than another, or your favourite artwork to a particular individual and the list goes on endlessly. Talk to those involved and explain yourself. In most cases those involved will accept your reasoning and matter will rest there.
If you don’t explain yourself then those left behind are left to guest why you did what you did, and most imagine the worst. If you think your will may cause conflict deal with it yourself while alive, don’t lob the problem amongst your family like a grenade from your grave. If you are not prepared to deal with the consequences of your actions yourself then you have to ask whether you are doing the right thing. And remember, even little things can be blown out of all proportion, like for example “How come mum appointed you her executor and not me too? She didn’t trust me!’’ Hurt can be unintended but felt deeply non-the-less.
4. Not telling your executor or relevant family where your original will can be located
People change solicitors and homes over time. Wills get lost. A missing will at best will cause delay and extra cost (assuming it is eventually found) and at worst (if never found), delay, unnecessary cost, and you having no control over who receives your estate. It could end up in the hands of someone you did not wish to receive anything.
5. Not preparing a new will as soon as you separate from your spouse
It takes at least 12 months to get a divorce and if you die before you are divorced with no will, or your old will still in place, then you will make your ex very happy indeed.
Estate planning is just that – planning. Take time to think about issues.
If you learned a lot from reading Rod’s article, then you should hear him speak! Come along and meet Rod, as well as other YourLifeChoices’ experts, in person at our Sydney Retirement Bootcamp on 15 July and you could have your own questions answered on retirement, estate planning and much more.