While the pandemic has caused more — and younger — Americans to create last wills, a 2020 study shows that over the last three years, 25% fewer Americans have certified estate planning documents in place.
When you delay estate planning, you are not setting up your loved ones for success.
Failing to make a sound plan means unnecessary tension and additional expenses for those you leave behind, during a time that’s extremely difficult already.
Why put off such a pivotal aspect of your family’s future? Maybe you think:
- I’ll call the attorney later. It’s not urgent.
- I’m healthy. Estate planning can wait.
- If something happens to me, my spouse knows what to do.
- I don’t want to think about leaving my family behind.
You aren’t alone in delaying your estate plan. Icons like Michael Jackson, Pablo Picasso, and Abraham Lincoln are among the list of high-net-worth people who did not have their affairs in order. They left behind contradicting documents, expired plans, or no plans at all.
Here are some common pitfalls in estate planning—and their consequences.
Complete lack of estate planning
Increased assets usually warrant increased detail in estate planning, but we all need a simple will – no matter our net worth. When Chadwick Boseman, known as T’Challa/the Black Panther in the Marvel Cinematic Universe, passed, he did not have a will. His wife was left to sort out his assets based on state law, whether he intended that or not. If he had a retirement account with outdated (pre-marriage) beneficiaries, his wife could have been excluded from inheriting his assets.
The need for judicial involvement
The judicial system gets involved when there is no planning, making the assets of an estate public knowledge. Most people do not like the idea of their private financial life on display or handled at the mercy of the government. Prince died without an estate plan and a net worth of approximately $300 million. His estate likely included royalty rights to his catalog of music and other assets that needed to be handled in a courtroom at significant expense.
An outdated plan
Maybe you made a will once, but you haven’t updated it recently. Estate planning is not intended to be a “one and done” task, but an ongoing assessment of your personal finances. As families change and circumstances evolve, it is important to adjust your estate plans.
Divorce, remarriage, and the birth of new children affect the desires of many – famous or not – but often they fail to update their legal documents. With a current estate plan, a family death is hard enough. With an outdated plan, the family is under additional stress as various beneficiaries disagree about the details. Finances are wasted on legal fees, and the resulting turmoil can alter family dynamics permanently.
Heath Ledger established a will in 2003 but died in 2008. His will specifically left his possessions to his parents and siblings. However, his daughter was born in 2005, and the will did not include any provisions related to children born after the execution of the document. After a very public (and likely very costly) family feud over Ledger’s assets, his daughter ultimately ended up with his entire estate.
Contradictory wishes in your estate plan
It’s important to ensure that any changes to your wishes are not just updated in your estate plan, but also communicated to parties who will be affected. Adding an extra signed document to your plan is not usually enough. Plus, if it doesn’t echo your official estate plan, it can cause unnecessary confusion.
Princess Diana had a relatively straightforward will but wrote an additional letter that did not mirror her will. The letter included directions to leave monetary bequests to her godchildren, while her will specified only personal items for them. The executors ended up following the will since it was a certified legal document, and they ignored the letter of wishes.
So, what does this mean for you?
Make a clear will, and revisit it regularly. Estate planning is not a singular event, so update your plan as circumstances change. Communicate regularly with your financial advisor and estate planning attorney to ensure that your wishes are properly carried out and your loved ones will not be burdened unnecessarily when you pass. And as awkward as it may sound, communicating your wishes regularly with your family will also help avoid the potential confusion later.
Questions about your estate plan?
We’ve seen it all. Schedule a 15 minute call with one of our advisors to talk through any questions or get a second opinion. You can also submit a question using the form below.