Six Big Mistakes People Make with Their Wills Revisited
Episode 345 - Just having a will is not enough. You need to get the details right. Here are 6 big mistakes we see people making when they structure their wills.
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Transcript of Podcast Episode 345
Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, we take a look back at one of our favorite previous episodes, six big mistakes people make with their wills. Here they are in order.
1. Doing Nothing
Pablo Picasso has been quoted as saying, “Only put off until tomorrow what you are willing to die having left undone.” The biggest mistake you can make with your will is not having one at all, and procrastination is enemy #1.
If you have any assets at all, they are worth protecting. And the last thing you want to do is die “intestate,” that is, without a will. Dying intestate means that the disposition of your assets will not be decided by you or your family, but by state law. Is that the best arrangement?
2. Not Reviewing and Updating
Let’s get real: having a will is the most important step. But it’s not enough. Tax laws and asset values change. As time passes, you might change your mind about who gets what in your family, or you may have a falling out with your favorite charity or even a family member. Even your choice of executor may need to be updated.
One common benchmark is to make sure your will is updated at least once every 5 to 10 years, or whenever there is a major tax law change. Another time to re-evaluate your will occurs whenever a change occurs in your family’s make-up, for example, a marriage, a divorce, a death or even a birth.
3. Picking the Wrong Beneficiary
This is one hazard that can easily undo most, if not all, of your planning. IRAs, 401(k)s and life insurance policies are generally administered outside your will. The obvious potential problem here—and one we’ve discussed before—is divorce. It’s doubtful you would still want your ex to be the beneficiary of your IRA or life insurance policy, but simply changing your will won’t help with that. You need to change the beneficiary of these non-probate assets..
And what happens if one of your beneficiaries dies before you do? Often with a life insurance policy, there is a contingent beneficiary. If the primary beneficiary dies before the insured, then the death benefit would be paid to the contingent beneficiary.
If there are no contingent beneficiaries, then the death benefit will usually be paid directly into your estate. This means that the amount of the death benefit will go through probate, where it is subject to public scrutiny and vulnerable to the claims of creditors.
4. Lack of Flexibility
People make estate planning decisions based on their current financial situation, but that is likely to change before you die. Let’s say you have a $3 million dollar estate.
