Let’s be honest: Estate planning is not a fun topic to dig into. It’s basically planning for when you’re incapacitated or dead. But it’s even less fun to talk about messy estate planning after the fact, when heartache and strained relationships make things heavier. Let’s take a look at six common issues that can cause stressful inheritance disputes and some of my best advice on how to avoid them.
Leaving surprises behind
The biggest pitfall when it comes to estate planning is the tendency to keep things secret. I get it. Nobody comes home after a long day at work and says, “Honey, I’m home. Let’s talk about what will happen when I die.”
That’s why nine times out of 10, the conversation starts with a trusted financial planner. I love that my clients are comfortable talking to me about this difficult stuff. But I always urge them to go home and talk to their loved ones about our plans, too. Talking about what’s going to happen when you die is a difficult subject, and we understand the impulse to push the conversation off. Planning ahead of time and talking as openly as possible now will alleviate heartache when the time comes.
Naming the wrong executor
We sometimes joke that you should make the person you like the least your executor. All jokes aside—this is a big, difficult job, and it’s important to assign the role to someone who can handle it. Too many times, I’ve seen estate issues come up because the person in the role of executor was just not able to handle the responsibility. An executor is ultimately the person responsible for dispersing your assets to your beneficiaries, closing up your accounts, paying remaining debts and selling your property. The truth is, the role of an executor can be with a person for years, and can include going to court, traveling, and working through reams of paperwork.
Make a short list of individuals you think are up for the job, and then think about their strengths and weaknesses. Are they responsible? Organized? Ethical? Do they have the flexibility in their schedule to handle the tasks they will need to accept as executor of your estate? Will they have the financial acumen to ensure that your assets don’t lose value?
Only estate planning for death
We often talk and think about death when we do estate planning. But we also need to prepare in case of incapacitation while you’re still alive. As we age, we sometimes get diagnoses that come on really fast, such as dementia and Alzheimer’s. Those can be very scary for a family, and there are often many other factors to consider in a short amount of time.
Your POA (Power of Attorney) is a person who can handle your affairs while you’re still alive. Many people may think that they would never need a POA, but I’ve seen situations all too often where having one has saved individuals and businesses from financial disaster.
Forgetting the sappy stuff
Many of my clients take the time and care to clearly indicate to whom their financially valuable assets will go after their death. Together, we often make detailed plans for where the cash, land, house and cars will go while the sentimental items slip through the cracks. This can cause awkwardness later on as family members may feel confused about what they can take. That’s why I recommend hosting a “claim my stuff” party. Here’s how it works:
- Get some colored masking tape, and then ask everyone to gather in your home.
- Have everyone take turns, one person going at a time, and ask each person to mark the items in your home they would like to inherit one day with the tape and their name.
- After this is complete, document your items and their claimants in a spreadsheet and include it in your will.
This doesn’t have to be a morose event. Instead, it can be an opportunity to get together and reminisce and it may even open the conversation up to some more difficult conversations, such as who you are naming as your executor, your funeral plans and who will inherit the financially valuable stuff.
Make sure the beneficiaries listed on your estate documents line up with who is listed at the account level. This may sound obvious, but it’s a common pitfall that causes delays in the process. You will have a primary beneficiary and a contingent beneficiary listed in your will, make sure those same individuals are listed on the account level. If there are contradictions, a lengthy process could ensue, and your estate could become open to contentious disputes.
One-and-done estate planning
Here at TRS, we look at estate planning documents every year to make sure that the beneficiaries listed are still current. Families evolve. Sometimes they get bigger, sometimes they get smaller. This is not a static document, but one that should be constantly considered and updated as you live your life.
Ready to get started on your estate planning with a trusted retirement planner? Contact us.
By Shane Perry, Retirement Planner