Our daily lives are fixated on a series of ifs. These ifs help us to avoid conflicts in our schedules and carve out time for the people and pastimes we love. We often say if we leave work early, we can make it to soccer practice or school plays. Or, if we tackle our to-do lists in the morning, we can set aside an hour for lunch with friends.
While death is not a part of our daily agenda, it is not an if like the rest of our plans but rather a when. So, when planning for the long-term, shouldn’t we approach the end of our lives with the same meticulous care and attention to detail as we do our weekend schedules?
We spoke with local attorneys David Kamer of Kaufman & Canoles, P.C. in Norfolk and E. Diane Thompson of Suffolk’s Pender & Coward about the most common mistakes people make when organizing their wills and estate plans. To help us avoid these everyday errors, Kamer and Thompson shared their years of experience with drafting wills that properly protect both your estate and loved ones.
Mistake #1: Not naming appropriate beneficiaries
Both Kamer and Thompson raise concern about the lack of competent beneficiaries, particularly of life insurance proceeds, annuities or retirement accounts. “Not naming an appropriate beneficiary can result in adverse income tax consequences, probate administration where it could have been avoided and proceeds passing in a manner contrary to one’s wishes,” explains Kamer.
Thompson further warns about naming minors or individuals with special needs as beneficiaries, as they are often unfit to receive and/or manage assets. To ensure proper designations, Kamer advises clients to use a beneficiary designation form provided by a financial institution.
Mistake #2: Overlooking the use of trusts
Trusts, particularly revocable trusts, are the key to probate avoidance in estate planning. Trusts also ensure a number of actions for spouses and loved ones of the decedent, including proper inheritance by a child, the protection of inherited assets from claims of potential creditors and proper distribution of assets to named children in the event the surviving spouse remarries. Thompson also advises clients to place real estate in trusts, especially if there are multiple beneficiaries of the estate.
For the trust to function properly, however, Kamer says a revocable trust must be funded. “If one has created a revocable trust for the purpose of avoiding probate, it only operates as intended if the assets are actually re-titled to the trust or if the trust is named as the beneficiary of assets during life,” he says.
Mistake #3: Losing the will
You spend large amounts of money and time finalizing a will, so it is important to have a safe place to store it. Unfortunately, there have been circumstances where the decedent loses a will or fails to inform their executor of the document’s location. Kamer explains that for both the executor to be appointed and the estate to be probated, there must be an original will. A copy can be presented in lieu of the original document if permitted by a judge, but even then, success is not guaranteed.
Thompson also notes that in the event of a missing will, legal officials often presume it was purposefully destroyed by the testator.
Mistake #4: Diminishing the importance of personal property
People expend most of their energy on organizing the largest assets of their estate like property, debts and insurances. Lost in the shuffle are sentimental items like jewelry, heirlooms or artwork that Kamer claims cause the most discord among beneficiaries. “This can be avoided by preparing a list describing each item and its intended recipient and keeping that list with the will,” he says.
According to Thompson, organizing the gifts into a specific distribution order is also paramount. “We have seen wills where giving away the residue of the estate precedes a specific bequest,” she adds.
Mistake #5: Dangers of a holographic will
Thompson explains that while holographic or handwritten wills are recognized in Virginia, they are often riddled with mistakes. Basic mistakes include illegibility or changes that are not as clearly marked as they would be on a typed will. “While the testator may be hoping to save the expense of having a will drafted, the expense of administering or interpreting a holographic will can often be greater,” she says.
Learn more here about the Top Lawyer of Wills, Trusts and Estates John T. Midgett.