Top 5 Estate Planning Mistakes to Avoid

Co-Authored by Taylah Gibson, Paralegal

KEY TAKE OUTS

• Proper and considered estate planning is vital to ensuring that you are taken care of in the event of becoming incapacitated by accident or illness, and further, that your loved ones are taken care of after you pass away.
• Estate planning involves setting up legal documents which provide clear instructions to manage your legal, financial and health related affairs.
• There are common mistakes which may impact the validity and effectiveness of the estate planning documents or lead to unintended consequences.
• Considered estate planning can provide peace of mind, knowing that in the event that you are incapacitated or pass away, your loved ones, life choices and estate will all be looked after in the way that you would like. 

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Estate planning is the process of deciding how your assets and general affairs will be handled when you pass away or become incapable of making your own decisions.

Estate planning often includes the preparation of a will, but regularly includes preparing other legal documents to provide for the management of your finances, your future medical decisions, the care of your minor children, business succession and more.

 

Mistake 1: Not having an estate plan!

Estate planning is a task that most people do not enjoy doing and it will often sit in the “to do” pile for a long time. We understand that sometimes individuals put off the task because their family situation may not be “perfect”, and they may find it difficult to confront the prospect of their death or incapacity.

Instead of putting it off, we recommend you get even a basic will and power of attorney in place, even if you think you may need to change it later. In our experience, it is far more difficult and costly to navigate a person’s estate whey they have passed away without a will in place or lost their mental capacity without a proper power of attorney in place.

 

Mistake 2: Not updating your estate planning documents when you experience a major life event

It is important to review and consider updating your estate planning documents after experiencing any major life event.
These common life events should prompt you to review your estate planning documents:

Marriage, separation or divorce: Your own marriage or divorce has legal implications to your will and other estate planning documents. Marriage will revoke any earlier will you may have made, and divorce will revoke any part of your will providing for your former spouse. A separation does not have any automatic impact on your estate planning documents and we recommend that consider updating your will to safeguard your estate from your former spouse.

Birth of a child: Depending on how your will is drafted, you may need to update your will to provide for any additional children.
Death of an executor, attorney or beneficiary: If someone you have named in your estate planning documents has died, you should consider if your will or power of attorney has nominated any other person as a substitute.

Significant changes to assets: Acquiring or disposing of major assets can impact the overall structure of your estate plan.
We recommend that your estate planning documents are revisited every 2-3 years or after any of the major life events and update them if any changes are necessary to ensure they still reflect your wishes.

 

Mistake 3: Failing to account for all assets

It is important to properly consider all your assets and review the key documents for your real estate, investments, personal property, company assets, interest in trusts, superannuation and life insurances.

In today’s modern society, we also need to consider our digital assets like online accounts, social media profiles, cryptocurrencies and digital files.

When making a new will, it is critical to understanding and categorise whether an asset is an estate asset or non-estate asset. The will can only provide directions in relation to assets that you own in your sole name. Assets like superannuation, interest in family trusts, insurances and jointly owned assets are not automatically captured by your will and require separate consideration.

For example, superannuation is distributed at the discretion of the Trustee for your superfund if a valid Binding Death Benefit Nomination hasn’t been put in place.

Failing to account for non-estate assets can lead to unexpected or unequal distribution of assets, unfavourable tax consequences and sometimes legal disputes.

Mistake 4: Choosing the wrong executor, attorney or guardian.

Your executor will responsible for managing your estate after you pass away. Your attorney will be responsible for managing your legal and financial affairs if you are incapacitated. Your guardian will take care of your medical and lifestyle needs when you are no long able to make these decisions for yourself.

Too often, people will nominate the same person or persons for each of these very different roles. Whilst that may be appropriate for some, it is important that you choose a person who can fulfil the duties competently and impartially.

A good executor, attorney and guardian should first and foremost be trustworthy and responsible. It is also helpful if they have strong organisation skills and the time to assist you. You can also consider a professional executor or trustee, such as a corporate trustee or lawyer.

Simply appointing adult children can also be problematic if they do not possess the skills and attributes. It could lead to mismanagement of your assets, or family conflicts and legal disputes.

 

Mistake 5: Failing to consider beneficiary needs

Deciding who should benefit from your estate requires careful thought and consideration to ensure your wishes are carried out exactly as you intend them to be.

One of the biggest estate planning mistakes is adopting a one size fits all approach to all beneficiaries in the will and failing to consider their unique needs and circumstances.

A testamentary trust can be used to protect the inheritance for a high-risk beneficiary, which could include an individual who:
a) is a minor under the age of 18;
b) has drug or alcohol addiction;
c) has poor financial skills, spend-thrift tendencies or bankruptcy;
d) is going through a separation or relationship breakdown; or
e) works in a professional industry susceptible to negligence claims.

A special disability trust can be used to fund the ongoing care, accommodation and medical expenses of a disabled child without affecting their entitlement to a disability support pension.

 

CONCLUSION

Our team of experienced estate planning lawyers are ready to assist you in preparing a comprehensive estate plan and finding the right solutions to your needs. Preparing your Will, Power of Attorney and Enduring Guardianship documents is the first step to ensuring that your wishes are being upheld, and your loved ones are looked after.

 

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