Estate planning can be more than a little complicated! Whether you are reviewing your plan or creating one from scratch, avoid these common estate planning mistakes and make the process as smooth as possible.
Not Making a Plan
Possibly the most common mistake in estate planning is not having a plan at all!
Many people put off estate planning, assuming that their spouse will automatically inherit everything or thinking they have plenty of time to create a Will, but without a plan, nothing is guaranteed, and your loved ones may not receive everything that you want them to.
Creating a plan can be much easier than you may think, especially with The Planning Bee. Our legal experts will discuss your options regarding Will writing, creating a trust, or establishing a Lasting Power of Attorney.
Your plan will be personalised to you and will be tailored to your needs precisely. Our paralegals will ensure that everything you need is established and in place to protect your loved one’s future.
Not Updating Your Plan
If you have a plan for the future, one thing that can be easily overlooked is not updating it. Many people think that once their Will is in place, they will not have to check it again, but this is a big misconception that can be costly in the future.
For example, your Will is automatically invalidated if you have recently married; however, many people may not know this. Without updating your Will and estate plan, your estate will be distributed according to the intestacy rules.
Also, if you have recently divorced, your Will is not automatically invalidated, and if you do not change it, your ex-spouse may still be entitled to your assets should you pass away.
Reviewing your Will and estate plan every five years is an excellent way to avoid any potential mistakes like these and ensure that your Will is valid. It also allows you to add in any new beneficiaries you may want to include, such as any new children or grandchildren who may have been born, as well as establish trusts or Lasting Powers of Attorney.
Naming Only One Beneficiary or Executor
Even if you want your spouse or child to inherit all of your assets, naming just one beneficiary for your estate is a common mistake many people make. If your chosen beneficiary passes away before you do, and you do not update your Will with a replacement, your assets may be distributed according to intestacy rules and may go to people you would not have picked.
To avoid this mistake, name a contingent beneficiary in your Will, even if you want your estate to go to one specific person. If your original beneficiary passes away before you, your contingent beneficiary will be next in line to receive your assets.
Naming only one executor is a similar mistake to naming only one beneficiary. Your executor is responsible for administering your estate, paying off any remaining debts and ensuring that your beneficiaries receive the assets you have left them. Designating more than one executor ensures that someone remains to manage your estate if one passes away before you do.
Even if you only want one executor for your estate, naming a contingent executor is a good option. You could also appoint a professional executor for your estate, which can take the weight of responsibility off your loved ones during a difficult time but can be much more expensive.
Not Utilising Trusts and Powers of Attorney
Many people think that they only need to write a Will for their estate plan. However, this thinking can cause people to miss out on the many benefits of trusts and Lasting Powers of Attorney.
Trusts are powerful estate planning tools that can protect your assets from many different things, such as:
- Sideways disinheritance – if you remarry after your spouse passes away, your Will is invalidated. If you pass away without creating another one, your new partner will receive the majority of your estate, and your children may be disinherited. This is known as sideways disinheritance, and it is often accidental. However, placing assets such as property in a trust and naming your children as beneficiaries avoids this possibility and allows you to include your new partner in your Will without worrying about leaving out your children.
- High care fees – care fees are incredibly high, and if you have assets above £23,500 in England or £50,000 in Wales, you will have to pay 100% of your care fees. However, establishing a trust and placing your share of your property within it can help you to avoid the need to sell your home to fund care, as assets in trust are not counted as part of your overall estate.
- Divorce – as a parent, you may worry that if your child divorces their partner, the inheritance you leave them will be halved. A trust, specifically a Family Trust Will, can protect your assets for your child, ensuring that they will not be classed as marital assets if they divorce. No matter how much you like your child’s partner, protecting their inheritance from the potential of divorce can help to secure your child’s financial future from any eventuality.
Lasting Powers of Attorney (LPAs) are also key estate planning tools. They grant a person (or people) of your choosing the power to make decisions on your behalf if you lose capacity due to an accident or declining health. However, they must be established when you still have full mental capacity, and by the time many people need them, it is often too late.
There are two types of LPAs: one for health and one for financial decisions. You can establish both kinds, giving your chosen attorneys the ability to make decisions on more aspects of your life if you need to.
You may never need to use a Lasting Power of Attorney, but having one in place can provide peace of mind if anything ever happens in the future.
There are many pitfalls in estate planning, so avoid these common mistakes when managing yours!
The Planning Bee offers expert legal advice and help with watertight estate planning. Our paralegals have decades of experience writing Wills, establishing trusts, creating Lasting Powers of Attorney, and creating bespoke estate plans for your precise needs. Contact us today to find out more.