Most people only grow old and die once, which means, generally, that they only need one estate plan — and anything you do only once, you’re likely to do poorly.
That’s why it’s important for wealth managers, financial advisors and estate planners to help their clients get it right the first (and only) time. Here are 10 of the biggest mistakes clients can make when estate planning.
That time will eventually come when all of us will meet our maker. That’s why it’s important to push clients to have their own estate plan, before it’s too late and state laws intervene by creating one for them.
2. The DIY mentality:
While a do-it-yourself mentality may be admirable for some things, it is often wise for clients to seek a professional advisor when treading the murky waters of estate planning
3. Failing to think from all angles:
Sometimes clients get too invested in a particular planning approach and forget to look at the big picture. While advisors should offer solutions to clients, they should also provide clients with “what if” scenarios, so that they are fully prepared for what might go wrong.
Oftentimes, clients do not take into the account that they might get divorced. As a contingency, clients can place restrictions on the money in the trust being distributed outside of the family. Or they could use a distribution standard that gives discretion to the trustees.
5. Missing the fine print:
The fine print in estate planning documents can be the difference between retirement
in the Bahamas or in a trailer home. To avoid being manipulated by the fine print, make sure the client and any professional advisors involved has dotted every "i" and crossed every “t."
6. Forgetting pets:
Sometimes, clients forget to consider pets. When they die, their pets often have to follow them to their grave. Set up a pet trust to care for animals after the client dies.
7. Failing to update all documents:
Failure to update or title clients’ other documents may erase any benefits those estate planning documents offer. Make sure the client re-titles the assets in the name of the trust — not themselves — for clarity. And check
regularly to ensure that beneficiary designations on all retirement documents are up to date. (They might not want that $1 million to go to
their deadbeat ex-spouse anymore.)
8. Underestimating trusts:
Some clients assume that trusts are only for minor children. In actuality, trusts are asset-protection vehicles for the entire family
and can protect the assets from the claims of creditors.
9. Failing to consider digital assets:
When a client dies, their spouse or other heirs may not have access to the password for digital assets. As a result, there’s value that they can’t get to. To prevent this, make sure that clients have a list of all their online user names and passwords, and that the appropriate family member or trustee has access to the information.
10. No passing on of digital libraries:
As of this writing, clients cannot pass their digital libraries and music collections down to their heirs, due to terms of service of the major sellers of digital content. While this may change in the future, clients will just have to accept this fact for now.