Common Mistakes and How to Avoid Them
Creating these essential legal documents is a huge step forward, but the process doesn’t end there. Certain common mistakes can undermine even the most well-intentioned plans. Being aware of these pitfalls is the first step toward avoiding them and ensuring your plan works as intended when it’s needed most.
Mistake 1: Procrastination
This is by far the biggest and most common mistake. People delay planning because they feel they are too young, too healthy, or don’t have enough assets to justify it. The reality is that an unexpected accident or illness can happen at any age. Waiting until you “need” these documents is too late, as you must be of sound mind to sign them.
How to Avoid It: Treat estate planning like any other important life task. Schedule an appointment with an attorney or set aside a weekend to begin your research. The hardest part is starting. Once you begin, you will likely find that the peace of mind it provides is a powerful motivator to see it through.
Mistake 2: The “Do-It-Yourself” Pitfalls
While online forms and DIY kits can seem like a cost-effective solution, they come with significant risks. Estate laws are complex and vary dramatically from state to state. A generic form may not be legally valid in your jurisdiction, or it may fail to account for your specific family and financial situation. A small error in wording or execution (like not having the correct number of witnesses) can invalidate the entire document.
How to Avoid It: For anything beyond the most simple of estates, working with a qualified estate planning attorney is a worthwhile investment. An attorney can provide personalized advice, ensure all documents are compliant with your state’s laws, and help you think through scenarios you may not have considered. For official information and to better understand your rights, you can consult government resources like USA.gov and the Consumer Financial Protection Bureau (CFPB).
Mistake 3: Choosing the Wrong People for Key Roles
Selecting an executor for your will, an agent for your power of attorney, or a trustee for your trust is a critical decision. It’s tempting to simply name your oldest child or a close sibling, but you must consider their honesty, financial responsibility, organizational skills, and willingness to serve. These roles can be demanding and time-consuming.
How to Avoid It: Have an open and honest conversation with the person you are considering. Ask if they are comfortable taking on the role. Make sure they are trustworthy and capable of handling the responsibility. It’s also wise to name one or two alternate or successor agents in case your first choice is unable or unwilling to serve when the time comes.
Mistake 4: Failing to Fund Your Trust
A common and costly error for those who create a revocable living trust is failing to “fund” it. This means you sign the trust document but never actually transfer the title of your assets into the trust’s name. An empty trust is useless; any assets not formally titled in the name of the trust will still have to go through probate.
How to Avoid It: After you create your trust, work with your attorney and financial advisor to systematically retitle your assets. This involves changing the deeds to your real estate, updating the ownership on your non-retirement investment accounts, and changing the title on bank accounts. It is a process of paperwork, but it is the essential step that makes the trust effective.
Mistake 5: Forgetting to Update Your Plan
Estate planning is not a “set it and forget it” task. Your life changes, and your plan should change with it. Major life events—such as marriage, divorce, the birth of a child or grandchild, a significant change in your financial situation, or the death of a named beneficiary or agent—should all trigger a review of your documents.
How to Avoid It: Schedule a review of your legal documents every three to five years, or immediately following any major life event. Pay special attention to your beneficiary designations on retirement accounts and life insurance policies, as these are easy to forget but have a major impact. For tax implications, you can always refer to the IRS website for official guidelines.
Mistake 6: Poor Communication and Inaccessible Documents
You can have the most perfectly drafted legal documents in the world, but they are useless if no one knows they exist or where to find them. Hiding your original will in a secret location or putting it in a bank safe deposit box that gets sealed upon your death can create huge problems for your family.
How to Avoid It: While the contents of your will can remain private, you should tell your named executor, trustee, and agents where to find the original documents. Store them in a secure, fireproof location at home. Provide copies of the relevant documents to the people you have appointed. Your health care agent should have a copy of your advance directive and health care power of attorney so they can access it in an emergency.
