Estate Planning Mistakes to Avoid for Your Florida Retirement

Estate Planning is one of the most complicated and important financial decisions you will ever make in your lifetime. The emotions involved in making these judgements that are so important to your loved ones, together with the natural resistance and procrastination about confronting our own mortality makes this a very easy topic to put off!

But it’s never too soon to think about the legacy you want to leave those closest to you that you love the most. And successfully avoiding several of the most common estate planning mistakes that can diminish the amount your heirs eventually receive. As well as hopefully, leaving everyone satisfied with the process and outcome with clarity rather than conflict.

Failing to Have an Estate Plan

Not dedicating the time to create an estate plan is the single biggest mistake because it deprives the people you love and want to help the most of having a clear roadmap of your wishes, assets and how they should be divided.

Procrastination is the enemy leaving all the wealth you have created in this lifetime vulnerable to unexpected taxes or expensive legal challenges when crucial elements are left unclear.

None of us are promised tomorrow, which is why you want to do this before any mental impairment may be experienced from an accident, stroke or dementia that would render you unable to perform such an important task in the future.

None the less, a recent Caring.com study found that 43% of Americans without a will said they planned to wait for a medical diagnosis to create one. And many people mistakenly believe that estate planning is only something for the rich or elderly.

Fact is, everyone can benefit from a will and estate plan no matter what age. Underestimating the importance of having an up to date estate plan expressing your current sentiments and assets, and how you would like them to be divided is the biggest estate planning mistakes you could possibly make!

Doing it Yourself

Do it yourself estate planning that usually involves using fill-in-the-blank templates and forms while it may initially seem cost effective, it can result in very expensive mistakes. This is an extremely important legal document that determines the fate of all of your wealth and can very easily be rendered invalid when not executed properly.

Estate planning is not a one size fits all proposition. Off-the-shelf templates acquired on the Internet may lack customization to your particular situation. Estate planning laws vary from state to state and any failure to fully implement them with the directives of your state can create very expensive mistakes that are costly to correct.

Choosing the Wrong Executor or Trustee

No matter how carefully you prepare and create your will and estate plan, choosing the wrong executor or trustee can cause the other elements to fail to be acted upon properly. Choosing someone unqualified, disorganized, or emotionally involved can lead to conflict, delays, or costly mismanagement.

Can you rely upon them when you are not there? Always request their help in advance of anyone you intend to name as an executor or trustee.

Disregarding Family Dynamics

While we all hope that after we pass your family and loved ones will join together in harmony and execute your wishes in good faith, unfortunately, we all know of families that have been torn apart by probate challenges that destroyed the harmony of lifelong relationships when things are left unclear in a will. Too often this becomes an emotionally fraught and contentious process.

The solution is to list all of the properties of tangible and sentimental value with clear asset titling instructions as to how it should be divided.

Failing to Add Beneficiaries

Asset titling refers to the manner in which you own an asset and how it is recorded. This may be in your own individual name, jointly with someone else, or in a trust or other entity. Joint accounts and beneficiary designation are frequently overlooked in estate planning and from a legal standpoint can often bypass the terms of your will or trust.

Assets titled in joint tenancy can pass outside an individual’s will and to the surviving joint tenant. Failing to review and accurately define the title of your assets can create a lot of confusion if, for example, you own a bank account that is held with another person.

Major life changes such as divorce, incapacitation or death of a partner can necessitate updating your documents to reflect your current situation that can get nasty if left unattended.

Naming Only One Beneficiary

You should always have more than one beneficiary designated for any of your assets. This is because if anything were to happen to that person and die before you, you need to define a primary and one or more contingent (secondary) beneficiary in case of that potential outcome. Be sure to indicate who is next in line for that asset and ideally name multiple beneficiaries.

Not Discussing with Your Family and Friends

Generally speaking, it is very important to have a discussion with your will’s executor and possibly others named in your will so they understand what is expected of them and where documents are stored. There are exceptions to this rule for course, where ill feelings have caused someone to be excluded from your will who may have had some expectations otherwise.

But it’s very important to share your will and estate plan with your loved ones for clarity to avoid unnecessary stress, confusion or conflict after your passing. Make sure to communicate your intentions clearly while you are still able to.

A good estate plan is one where everyone clearly understands it and their role in it.

Ignoring the Impact of Taxes

Depending upon the size of your wealth, estate tax liabilities can be costly if not understood and planned for. Taxes are deducted from the total amount before any heirs receive their share.

At the federal level, the amount of wealth exempt from inheritance taxes has recently been changed so it’s important to have the most up to date information on this. Florida has no estate taxes.

Ignoring the Benefits of Trusts

Trusts can protect your assets by making sure they are distributed according to your wishes. They offer many tax benefits while you are still living, and can help to avoid expensive probate challenges and costs. They avoid conflict and protect your privacy by keeping your assets from becoming public record as part of the probate process.

A trust differs from simply having a will. A will can be challenged in court with probate. A will may not be executed until any probate issues are settled, potentially depriving heirs of the timely reception of the benefits that you bequeath.

With a trust, your assets are transferred into the trust while you are still living. Because you no longer own them as an individual, they may not be challenged in probate court. Trusts can give you tax advantages while you are living, whereas a will only takes effect after your death.

The two most common types of trusts are revocable trusts, that offer you the flexibility to change the terms of the trust agreement by making an amendment to the document, and irrevocable trusts which typically once signed may not be altered without a third party.

Because many people prefer to give money to charity where they feel they have greater control over how their money is spent than to the government in the form of taxes trusts can be a highly effective way of making charitable giving part of your estate planning.

Deciding which type of trust is right for you depends upon how much freedom and control you feel you want now, versus greater tax benefits and advantages later.

Not Planning for Long Term Health Care

Frailty is a fact of aging, and many people fail to provide for long term care that can quickly deplete savings without consideration of the costs involved for medical emergencies or incapacitation. This is particularly true of individuals with a family history of Alzheimer’s Disease who need to plan how their care will be managed.

There are several approaches to Financial Planning for Long Term Care such as long term care insurance, hybrid life insurance policies with long term care riders, or trusts to protect assets for Medicaid planning.

Estate planning isn’t just about what happens after you die, but how you protect yourself when you are alive managing health care costs.

Forgetting to Record Your Digital Assets

The Internet has added an important new class of assets that need to be titled in your estate plan listing all your digital assets. These may include online banking, cryptocurrencies, cloud storage of digital files of your estate plan and social media accounts.

Login information of all of your accounts that will need to be accessed to administer your estate needs to be listed and provided to your executor and trustees. Many people use a password manager or vault to do this.

Forgetting to Provide for Charitable Giving

Especially if you have a large estate, but even if you don’t, there is a satisfaction with giving that feeds our soul and gives us peace of mind.

Key Documents Missing

Incomplete, inaccurate or out-of-date documents can create expensive and stressful outcomes for your executor, trustees and heirs. Your estate plan must include these essential documents.

Your last will and testament clearly outlining your final wishes and instructions on how you would like your assets distributed. All beneficiaries must be assigned to bank accounts, IRA ,401 (k) accounts, life insurance policies, pensions and real property.

Include a durable power of attorney for medical care. This names the person to make medical decisions for you if you become incapacitated mentally or physically. This includes an advanced medical directive regarding using or not using life support.

Durable power of attorney names the person you have assigned to act upon your behalf in legal and financial dealings in case you become incapacitated.

Proof of Identification. This can include drivers license, passports, Social Security card, marriage and divorce certificates.

The trust agreement documents define whether it’s a revocable or irrevocable trust. This is not a required document for estate planning but can make it much easier for your heirs if a trust has been created.

Funeral instructions. Think about how you would like your life celebrated and indicate the burial or cremation service of your choosing. Put it into writing.

Failing to Fund Your Trust

A surprising number of people put the time and effort into creating a trust but fail to fund it once it is in place. A trust only serves its intended purpose if assets are actually transferred into it, such as real estate, bank accounts or investments.

Assets that are not titled in the name of the trust can still go through probate defeating the purpose of setting up a trust in the first place. Work with your financial planner or attorney to be certain assets are correctly transferred and titled in the trust.

Not Securing Your Estate Plan

Your estate plan is of little value if your executor and heirs can’t find it. Placing it in a safety deposit box may make it complicated for them to access after you have passed.

Keep your estate plan original in a fireproof place like a safe your executor has access to. Make copies of your documents and give them to your executor and trusted family members.

Be certain anyone named in your will and estate plan has contact information for the executor.

Not Updating Your Estate Plan Frequently Enough

Estate planning is not a set it and forget it proposition. You need to update it every 3 to 5 years, or when any Major Life Changes Require You to Update Your Estate Plan.

Marriage, divorce, or the death of a partner are some of the most common changes occurring in a person’s life that requires a review of your will or estate plan to reflect these changes going forward.

Have a Certified Financial Planner® Help Make Sure You Avoid These Expensive Estate Planning Mistakes

Whether you already have a Florida estate plan in place or want to get started, make sure you have the help of a competent Florida financial planner to make sure your wishes are faithfully enacted when you can no longer do that yourself.