Poor estate planning is a recipe for disaster. Look no further than Dickens’ Bleak House to witness the tragedy and melodrama inadequate estate planning can cause. While having your estate planning documents prepared is the first hurdle to overcoming these types of disasters, there are several threats that lurk around the corner that might derail your wishes.
According to a TF Wealth survey of over 100 estate planning professionals, family conflict is the number one threat to a peaceful inheritance. If children are treated differently in an estate plan, they often assume that a mistake was made in drafting the documents or that someone has exerted undue influence on the parent. While this may not be the case, without any guidance from the planner, family members can begin to think the worst of each other.
Sloppy or No Estate Planning
If you have not done any estate planning, or if what you have done is ineffective, your estate will be subject to New Mexico’s intestate laws. These laws predetermine who will inherit your assets and in what proportion. While that statutory scheme might work for some people, it will have bad consequences for those who have been married multiple times, have children from prior relationships, or children with special needs or who need asset protection. If you have not done any estate planning, you’re leaving your inheritance and your legacy in the hands of the government.
In order to ensure that your wishes are being carried out in the face of these dangers, it is important that you know what a successful estate plan looks like.
Eliminate (or Reduce) Family Conflict
The goal here is for there to be no surprises. If you are choosing to treat children or other family members differently, be open and honest about it. It may be helpful to have a conversation about your wishes prior to your death so that those individuals understand why you have made those decisions. Even if you do not have such a conversation, it’s important to discuss your plan and reasons with your attorney, so that the plan can be drafted to carry out your wishes.
Eliminate (or Minimize) Costs and Taxes
Watching inheritance wasted on taxes and fees will only lead to frustration and hard feelings. When preparing your estate plan, your intent is to benefit your loved ones, not the government. Working with a qualified estate planning attorney can help ensure that your assets are being handled in such a way that the administrative costs of your passing, and any income or estate tax are minimized or avoided.
Select Your Representatives
It is possible that, later in life, you may not be able to handle all of your finances or healthcare decisions yourself and may require some assistance from a loved one. Consider someone you trust who understands you and your desires. Don’t rely on someone just because they are the most convenient. Don’t count on your loved ones reading your mind about who should be in charge. Don’t leave your loved ones to sort this decision out among themselves when they may be overwhelmed emotionally. You must ensure that you’ve granted proper authority to the proper persons using a power of attorney, a trust, and a will.
Ensure that Everyone Gets What You Want
Your assets may be, or may in some way, represent your legacy. Do some real soul-searching about how and what you want to share with your family and friends. To ensure that your legacy is passed on in a meaningful way, consider including an explanation as to why someone is receiving a particular inheritance. If you have wishes as to how a gift of money is to be used, the recipient may appreciate hearing the hopes and dreams you have for them and their future even though you are no longer with them.
Make Sure Documents Are Up to Date
Life can change quickly. It is important that you review your estate planning documents with each life change (i.e. birth or death of a family member, purchase or sale of a major asset, change in health, etc.). It is also important to stay in touch with your estate planning professionals. Contact them when these major life changes occur, and make sure they contact you when there are changes in the law that affect your plan. This will help ensure that your estate plan stays effective and your wishes are carried out.
So do the groundwork that a little planning requires. And leave the melodrama for entertainment.