Estate planning mistakes to avoid

For many people, the fear of addressing your own mortality, and talking about death can be overwhelming, and is sometimes seen as tempting fate. Estate planning is an area of financial planning that many shy away from. Yet, your estate plan is one of the most important parts of your financial plan. Here are some estate-planning mistakes to avoid.

Procrastination is the biggest mistake you can make regarding your estate planning as you ignore or avoid the subject altogether. There are several ways to plan for your estate so there is really no excuse for doing nothing. A will is the most basic of all estate planning tools and is simply a letter appointing someone to be in charge of your estate and instructing exactly how you would wish your assets to be divided or distributed among beneficiaries.

If you have assets, children or a spouse you should make a will or have some other tool in place particularly if you are the primary breadwinner. This might include joint accounts, life insurance and other mechanisms. If you were to die intestate, that is, without leaving a will, your property won’t simply pass to your spouse as you might think; your property will be distributed according to laws of intestacy, which may vary from state to state and may not be in line with your wishes. You owe it to your loved ones to make provision for them otherwise you are only compounding their grief should something happen to you.

Why leave mystery, uncertainty and drama in your wake? Estate planning professionals usually recommend telling your family exactly what they can expect before you pass away unless there are unique circumstances that make it unwise to do so. Clearly these are difficult conversations, as people may not want to communicate what property goes to whom, as it can cause deep family rifts if one child appears to be favoured at the expense of others. Even if you would rather not discuss your estate plans with your immediate family, communicating with a trusted friend or professional will save beneficiaries from having to piece together a puzzle at a difficult time.

Bequeath assets is in a way that will improve the beneficiary’s lives and not stifle their growth or ability to become independent. Teenagers or young adults who have not yet learned to be responsible could have their sense of ambition curtailed if they inherit large sums too early. Trusts can be a more effective way to bequeath assets to young beneficiaries; they would be administered by a Trustee who will make distributions in accordance with your express instructions.

Failing to review and update an estate plan periodically or make changes to beneficiaries on insurance policies, retirement savings accounts and wills after a birth, marriage, re-marriage, divorce, death or other life changes can cause significant challenges including errors that could disinherit heirs. The laws and regulations governing wills and trusts may change from time to time and it is important to ensure that the structure of the estate plan still meets its objectives.

Not seeking professional advice is a common error. Professional support is readily available and should be sought. Depending on the complexity of the estate, a lawyer and a financial advisor might collaborate in order to cover all the issues involved. There are many issues that you might not have thought about, including the tax implications of holding property in various vehicles, gifting and the transfer of property.

Ploughing through disorganised records is cumbersome and difficult at the best of times but having to go through this during a time of grief and stress to try to unearth a will or other evidence of estate planning is something that we can all avoid. Organising your documents and information is vital for your estate planning; this should include your insurance policies, title documents, shareholding in companies, stockbroking records, bank documents, including where they are held, and relevant account numbers.

If you do not already have an estate plan, then it is time to put one in place. If you already have one, be sure that it is updated and meets your estate planning goals.

Nimi Akinkugbe has extensive experience in private wealth management. She seeks to empower people regarding their finances and offers frank, practical insights to create a greater awareness and understanding of personal finance.

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