A lot of people don’t understand how important it is to have a will. Mistakes are made all the time, even when the will is done by a professional. Here are seven common mistakes that people make in their wills and how you can avoid them.
1. Not having a will at all
This one might seem like a no-brainer, but the greatest mistake you can make is to not have a will at all. By not having a will, you are doing a great disservice to the people you love. No one will know what your true intentions are and your estate could be dragged through court for years, costing thousands or more in legal fees. You should always have a will in place to settle disputes and ensure your loved ones are taken care of.
2. Not keeping your will up to date
Although wills never expire, it is not something that should be one-and-done. Tax and estate laws can change and things that may have worked in the past may no longer be effective. You should update your will whenever a significant life change occurs, such as getting married or having a child. The last thing you want is for your will to be invalidated due to a technicality or half of your assets to go to your ex-wife just because you forgot to update your will.
3. Not choosing the right executor
Choosing the right executor can make a huge difference. The executor needs to be someone that you can trust to carry out your wishes. They also need to be someone who will be willing to spend the time and effort to do a good job. Being executor is a daunting task and many people find themselves in over their heads once they realize how much work it actually takes. If you cannot find anyone suitable, consider appointing a corporate executor. While it may be more expensive, you will have the peace of mind knowing that your executor is dedicated and acting in your best interests.
4. Not naming contingent beneficiaries
In some cases, you may outlive your beneficiaries (such as your parents), or you may die concurrently with them, such as in a fatal accident with you and your spouse. If you do not have a contingent beneficiary in place, then it is equivalent to having no beneficiary at all. Your assets will need to be probated, resulting in more headaches and legal fees. You should always specify at least one contingent beneficiary to protect yourself in these unfortunate situations.
5. Not being specific enough
What may be perfectly clear to you may be confusing for others. For example, if you state that you want Kim to receive your house, are you referring to your principal residence or your summer home or both? If you want your children to take over your family business, will the ownership be split evenly or will one child have controlling interest? It is important that what you write in your will is specific and leaves no room for ambiguity.
6. Not accounting for all your assets
People often forget to account for all their assets in a will. This could be because the will hasn’t been updated since acquiring the asset or sheer oversight. For example, you may have bought a new house or car after your will was last updated, or you may have forgotten about that savings account you haven’t touched in years. If these assets are not named in the will, they will be considered intestate and their distributions will be governed by intestacy laws in your jurisdiction. To combat this issue, consider having a residual clause which will state how these assets should be distributed if no beneficiaries are explicitly named.
7. Not naming a guardian for your children
While you may want your children to inherit your assets, it is generally not a good idea to give them a lump sum of money before they reach the age of majority. If you do so, the executor will have the authority to use the beneficiary’s share of the assets for their benefit until they reach the inheritance age. This may not be ideal because how and when the assets will be distributed will be left to the discretion of the executor. Instead, consider establishing a testamentary trust to hold the assets and have the money distributed according to a prescribed schedule. The trustee will have a fiduciary responsibility to ensure that the beneficiaries will be looked after and you will have peace of mind knowing that the funds won’t be misused.
Your will is perhaps the most personal document you will ever own. You owe it to yourself and your family to do it right. Being aware of these simple mistakes can potentially save you thousands of dollars years down the road.