IL Estate Planning Blog

Tuesday, January 8, 2019

3 Worst Estate Planning Mistakes and How to Avoid Them

3 Worst Estate Planning Mistakes and How to

Avoid Them

Larry Light details some surprising estate planning mistakes most of us make and how to easily fix them.

Larry Light


Once you're gone from this earth, the task of sorting out your estate plan

can be a maddening puzzle that might even spawn a family feud and

end up in court.


Trouble is, a lot of people don't devote the diligence to the plan process

that's needed. "Planning for one's demise," says tax attorney Ron

Silbert, a partner with Schoenberg Finkel Newman & Rosenberg in

Chicago, "is not a favorite human activity.


Here are three snares that commonly trip up an estate plan:

Lack of Information

Untangling the various parts of your estate can be daunting. Alas, you

may go to your reward without leaving your executor and loved ones

with a complete and updated list of where everything is and how to

access it.


Think of all the assets you've accumulated in a lifetime. Your brokerage

account, bank account, mutual fund holdings and so much else of value

are protected by a myriad of user names and passwords-and perhaps

by the answers to questions like the hospital of your birth and your first

pet's name.


The good news: Auto and homeowners insurance policies, previously

paper stuffed in a drawer, now likely are online. The bad news: Some of

your holdings are not available electronically, though. The deed to the

house and the mortgage documents, or paperwork saying the mortgage

is paid off, may lie in a safe deposit box that requires a key and photo

identification to access. The same goes for the paperwork for your car.

And not all of your precious possessions are financial in nature. Some

are of sentimental value, like that mounted photo of mom, dad and you

as a toddler.


Meanwhile, other possessions are wholly digital. Your Instagram

account, say. Fortunately, there are services like Mylennium that

can protect your digital assets, such as domain names, bitcoin

repositories, eBay and Amazon accounts and the like. Concerns about

cyber-theft and hacking are important.


Above all, you need to have one master roster that contains all user

names and passwords, for investment accounts and other financial

holdings. Some people keep it in their safe deposit box at the bank;

others, in a secure container at home. But these are not perfect

safeguards. "People tend to lose keys," notes Suzanne Brown Walsh,

an attorney with Murtha Cullin. More and more people are housing them

with cloud services like GlassPass, Dashlane and 1Password.


Beneficiary Designations Done Wrong

What's stunning is how often people don't realize that they must name

beneficiaries for their retirement accounts, annuity contracts and

insurance policies. Screwing this up is a surefire ticket for your assets to

end up in probate, an expensive legal process where your wishes may

be thwarted.


For instance, it's unwise to name someone in your will alone as the heir

to your mutual funds. That someone needs to be on file with the fund

company, too. Your will won't override what the designation is on your

retirement account: Different people may be in the will and on the



Bequeathing your assets requires some common sense. An article on

the American Association of Individual Investors website, by John Horn

and Dera Johnsen-Tracy of the Horn & Johnsen law firm, warns that

multiple beneficiaries for real estate often is an invitation to discord.

After all, Horn and Johnsen-Tracy write, "they all must agree on the

Realtor and the sale price, and until the property is sold all owners

should contribute equally to the maintenance of the property." And if one

beneficiary objects, get ready to rumble.


Outdated Plans

"Sometimes, decades pass after estate documents are signed, attorney

Silbert points out. Guess what? Divorces and other calamities take

place, changing the situation radically.


Do you really want your ex-spouse to inherit all your worldly goods?

That sounded like a great idea when you got married right out of

college. But now that you each are married to others, and you have

children with your second spouse, that's not so good. Meanwhile,

changes in tax laws might affect who gets what, when and how.

That's why the wisest course is to periodically review what is in your will.

And even more important, to ensure that all your plans are locked down

at the outset, avoiding unpleasant surprises and needless labor later on.


About the author: Larry Light is the markets editor of Chief Investment

Officer magazine. He has previously been an editor and reporter at the

Wall Street Journal, Forbes, BusinessWeek, MONEY and CBS

MoneyWatch. He is the author of Taming the Beast (John Wiley), a

history of investment strategies.

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