For those in the younger generation (i.e., Millennials and Generation Z), the talk of those two words is, in their eyes, a lifetime away. Most feel they don’t have the wealth nor resources to consider crafting one in the first place. Estate planning is a topic that many avoid with their parents, grandparents, and even their children.
It brings an uncomfortable feeling for everyone involved, leading to the conversation about death and one’s mortality. However, the short-term awkwardness of planning your estate can negate the long-term financial stress you will leave behind for your loved ones.
Creating generational wealth means preparing for any situation or family milestone that comes your way. When getting your affairs in order, here are 7 costly mistakes to avoid while planning your estate.
1) Not Creating a Plan
The most evident and ill-advised mistake you can make is not creating a plan for your assets. The promise of tomorrow is never guaranteed, and lack of preparation will lead to financial trouble for your family in the future.
Picture yourself as a young, thriving adult with a loving spouse and two kids. Like any other day, you go out for a simple drive to pick up a couple of things from the grocery store, head to work, or simply to get out of the house for a little while. However, that simple day turns into an accident that takes you away from that loving family.
Imagine during the grieving and preparations for your funeral; they have to figure out who gets what since you did not have a will in place.
You are probably asking yourself right now: What will happen to my estate if I don’t have a plan in place?
The simple answer is as follow:
Everything you owned will go through a probate-a legal term referring to your estate’s distribution by the court.
Since there is no estate plan in place, the state will appoint an administrator to handle all financial obligations for you (taxes, debt, expenses).
When all debt and expenses are satisfied, what remains will be divided between any living relatives.
If there is no administrator or living beneficiaries, the state will take over the estate.
It sounds painless, but there are factors you need to consider:
Perhaps the court appoints someone you don’t trust with your wealth, such as a parent with a gambling problem or your current spouse who gives little to nothing to your children from a previous marriage.
You don’t want the state to take more than what is necessary.
You have a domestic partner that most states will not recognize as a spouse or relative.
Not implementing instructions for your beneficiaries is like cooking a new dish without the recipe: Both lead to disaster.
Creating an estate plan and never updating it is asking for litigations to occur between multiple parties. The importance of having a robust financial plan includes adapting to significant events that revolve around your wealth. Examples include:
Marriage or divorce
A new addition to the family (through birth, adoption, or marriage)
According to NextGen Wealth, the recommendation to update your estate plan is between three to five years. If you are a forward thinker and don’t want to take any chances of something happening within that time frame, it is best to update it as soon as possible.
Therefore, you must prepare that you will live a long life. You should have in place what kind of short and long-term care you require in the event of a disability or a dramatic decrease in your health.
Which insurance policy do you have? Do you have a retirement home in mind? Will a member of your family or a healthcare professional take care of you? These are questions a person growing wealth should ask themselves when including a long-term care package in your estate.
4) Not Appointing a Guardian for your Minor Beneficiaries
Not assigning a guardian to care for your children if both you and your spouse have an untimely death is perhaps more costly than not having an estate plan at all. Both of you need to sit down and decide who you trust (whether a family member, godparents, or a trusted friend) to raise your children in your absence. Failure to do so might result in them being cared for by someone who has other “interests” than their well-being.
Jack and Sue died in a tragic plane accident leaving behind their three kids under 13 years old. They left behind at least 1 million in life insurance money but didn’t designate a guardian or let anyone know how they wanted the money spent. Many of the kid’s relatives filed for guardianship at the courthouse, including Jack’s sister (whom they trust) and Sue’s father (a greedy man with a short temper). Consequently, because he was able to convince the judge that he was most qualified, he won guardianship, resulting in years of wasting the insurance money meant for the children.
The lesson to take from this is spelling out in your estate plan who you want to take care of your kids. Choosing an adequate guardian will spare them from the financial stress at such a young age.
5) Not Taking Digital Assets into Account
People tend to overlook their digital assets when creating their estate plan. These assets include:
Social media accounts
Websites or blogs
Photos and videos
Any sensitive information stored in the cloud
Include digital assets in your estate plan for financial, personal, and emotional reasons. If you have a successful online business, you may want someone to take over and continue or completely take it down. You might have old photos stored away on your computer that your family cannot access because of passwords. Plus, you will need someone to inform everyone on your social media platforms that you passed away.
Allowing someone to enter your personal information will make it easier for your family to access your accounts without being accused of stealing your identity.
6) Not Hiring an Estate Planning Attorney
When it comes to the importance of financial wellness, being cheap is never the solution. Having an experienced estate planning attorney who understands your wants, needs, and goals is worth the money.
Here are just a few benefits of having this attorney on your team:
They draft up your estate plan to fit your goals.
You don’t have to pull hairs while doing your estate plan; that is the main reason you pay them a boatload of money.
Make sure you are complying with the laws within your state.
Giving you and your loved ones peace of mind
You can always depend on their expert advice.
Just a phone call away from answering all your questions.
Help you legally avoid taxes.
No one wants to give all their wealth to the government.
Sure, you could cut the middle man and save more money by creating an estate plan on your own. However, since we are preaching against financial stress and making mistakes, maybe just give the professional a chance.
7) Not Telling your Family about the Estate Plan
There is a movie scene (Knives Out, Meet the Browns) where a group gathers around the family attorney as he reads the will. When the twist comes to light, a wide range of emotions flood the scene, from shock and disappointment to pure rage. The confusion comes from the deceased not informing their family of what was in the estate plan. While meant for laughs in films, this is a severe mistake that has dire consequences.
Communication is vital in any situation, especially when it comes to family. Doing the opposite will cause a deep rift between your siblings, children, grandchildren, and others. Instill a positive financial mindset by being transparent with every decision regarding the estate plan. Doing so reinforces the importance of financial wellness by teaching appreciation of what they received.
Your estate plan is your financial legacy.
An estate plan is more than just sheets of paper with long, complicated words. It represents the legacy you want to leave behind for your children. Don’t waste another day without putting a plan in place for your future wealth. With Navit, our goal is to help you build wealth, have enough to retire with dignity, and transfer it to the next generation. Our app has a built-in legacy health check to get you started on your path. Click here to download and join the Navit community!
I am just a simple writer who wants to travel the world, eat at every restaurant in the world, and gain financial freedom before the age of 40 (45 at the latest). I specialize in content writing and social media marketing with the goal of working in the sports and entertainment industry. My interests include Film/TV, anime, sports, finances, and of course: food.