Common Mistakes You Might Make When Drafting a Will
Every year, countless individuals make significant errors in their estate planning, which can lead to disputes among heirs and unintended legal consequences. Here are the common missteps to avoid, helping you secure your legacy and provide for your loved ones.
Not Having a Will
Many people procrastinate on drafting a will, thinking it’s only necessary as they age. This delay can lead to significant legal challenges for family members if unexpected events occur. Everyone, especially those with assets or minor children, should consider creating a will early.
DIY Will Kits
DIY will kits often fail to consider all legal intricacies and personal circumstances. These generic kits can lead to wills that are not legally binding or don’t fully express the testator’s wishes. It’s advisable to consult with a legal professional to ensure the will is valid and comprehensive.
Forgetting to Update the Will
Marriage, divorce, the birth of children, or the death of a beneficiary require updates to your will. Failing to update your will accordingly can lead to unintended consequences and disputes among survivors. Regular reviews and updates ensure the will reflects your current wishes.
Choosing the Wrong Executor
An effective executor should be trustworthy, organized, and impartial. It’s a mistake to choose someone based solely on emotional ties without considering their capability to handle the role effectively.
Not Accounting for Debts
Neglecting to address how debts, taxes, and final expenses should be handled is a common oversight, which can create financial burdens for the estate, potentially reducing the inheritance for beneficiaries. Clearly outlining the responsibility for debts can prevent financial confusion after one’s passing.
Assuming Uniform Distribution is Fair
Equally dividing assets among heirs doesn’t always account for individual circumstances. Tailoring distributions based on specific criteria or contributions can sometimes be more equitable. Consider each beneficiary’s situation to determine a fair distribution strategy.
Excluding Personal Property
Failing to specify who gets various personal items can lead to disputes among family members over seemingly insignificant belongings. Personal property with sentimental value should be clearly assigned to avoid this. A detailed list of items and their intended recipients can prevent potential conflicts.
Ignoring Potential Conflicts
Understanding relationships and addressing potential issues in the will can mitigate disputes. Sometimes, explaining the reasons for certain decisions within the will can also help manage expectations and reduce grievances.
Not Planning for Incapacity
Many neglect to create living wills or powers of attorney that are crucial for managing affairs if they become unable to do so themselves. These documents should complement the will to ensure comprehensive planning.
Failing to Include a Residuary Clause
A residuary clause disposes of any assets not specifically mentioned in the will. Without it, leftover assets could be distributed according to state laws, potentially against the decedent’s wishes. Including this clause ensures that all assets are distributed as intended.
Underestimating Tax Implications
Ignoring the tax implications of inheritance can lead to a significant financial burden for beneficiaries. Effective tax planning within a will can minimize the tax load and maximize the value of the estate passed on. Consulting with a tax professional when drafting the will is advisable.
Not Witnessing Properly
A will must be properly witnessed to be legally valid, which typically means having at least two impartial witnesses present during the signing. Witnesses should not be beneficiaries to avoid conflicts of interest. Improper witnessing can render a will invalid.
Relying Solely on Joint Ownership
Some rely on joint ownership as a means to pass on assets, believing it simplifies the process. However, this can lead to unintended legal and tax consequences, especially if the co-owner is not the intended final beneficiary.
Omitting Funeral Wishes
Including funeral and burial wishes in a will can provide clear guidance to family members. Leaving these details undecided or not communicated can add stress during a difficult time. A clear expression of these wishes can ensure they are respected and followed.
Lack of Contingencies
Contingency plans for alternative beneficiaries ensure that your estate is distributed according to your wishes, even if circumstances change. Specifying secondary beneficiaries can prevent the estate from passing in unintended ways.
Disinheriting Someone Abruptly
Abruptly disinheriting a family member can lead to will contests and legal challenges. If you choose to disinherit, it should be done thoughtfully, with clear reasoning documented to minimize disputes. Consider discussing this decision with a legal advisor.
Not Using a Professional
Drafting a will without professional legal help can result in mistakes that make the will invalid or ineffective. An experienced attorney can ensure that the will complies with state laws and fully captures your intentions.
Vague Instructions
Vague or ambiguous language in a will can lead to interpretations that may not align with the deceased’s wishes. Precise language is essential to prevent potential legal battles between heirs. It’s prudent to use clear and concise terms to articulate your intentions unequivocally.
Not Securing the Will
Storing a will in an insecure or unknown location can lead to problems after death. A will should be kept in a secure, fireproof location, and trusted individuals should know where to find it. Consider keeping a copy with your attorney for added security.
Making Oral Promises
Relying on oral promises to convey wishes regarding your estate is unreliable and unenforceable. These should be formally included in the will to ensure they are carried out. Documenting all commitments in the will prevents reliance on memory and ensures clarity and fairness.
Overlooking Digital Assets
Today, digital assets, such as social media accounts, online banking, and cryptocurrency should be included in your will. Many overlook these when preparing their estate plans, leading to potential losses or unauthorized access posthumously.
Overlooking Pets
Failing to make provisions for the care of pets can leave them in uncertain circumstances. Designating a caretaker and setting aside funds for their care ensures pets are well looked after. This consideration shows foresight and responsibility for all dependents.
Copying Someone Else’s Will
Each individual’s situation is unique, and legal documents should reflect personal circumstances and state laws. Tailor-made wills prevent legal ambiguities and ensure personal wishes are accurately executed.
Josh Dudick
Josh is a financial expert with over 15 years of experience on Wall Street as a senior market strategist and trader. His career has spanned from working on the New York Stock Exchange floor to investment management and portfolio trading at Citibank, Chicago Trading Company, and Flow Traders.
Josh graduated from Cornell University with a degree from the Dyson School of Applied Economics & Management at the SC Johnson College of Business. He has held multiple professional licenses during his career, including FINRA Series 3, 7, 24, 55, Nasdaq OMX, Xetra & Eurex (German), and SIX (Swiss) trading licenses. Josh served as a senior trader and strategist, business partner, and head of futures in his former roles on Wall Street.
Josh's work and authoritative advice have appeared in major publications like Nasdaq, Forbes, The Sun, Yahoo! Finance, CBS News, Fortune, The Street, MSN Money, and Go Banking Rates. Josh currently holds areas of expertise in investing, wealth management, capital markets, taxes, real estate, cryptocurrencies, and personal finance.
Josh currently runs a wealth management business and investment firm. Additionally, he is the founder and CEO of Top Dollar, where he teaches others how to build 6-figure passive income with smart money strategies that he uses professionally.