There are a number of common mistakes in failing to correctly prepare Wills and Estate plans.
What follows is an overview of common errors in the preparation of Wills and Estate plans and how to avoid them.
Common Errors and How to Avoid Them
1. Documents Missing in Action
Documents (including digital documents held in the cloud) relating to your estate and non-estate assets and settling your estate and your assets might lose value.
Avoid this mistake by storing all your documents in one safe location and ensuring your executor knows where to find them and have access to them.
2. Misunderstanding Asset Structure
Assets are held in the wrong asset structure. For example, let’s say upon death you want an asset to transfer to your children from a first marriage. If the asset is owned by you and your current spouse as joint tenants, upon your death the asset will pass directly to your spouse and bypass any arrangements you may have made for the children of your first marriage.
Avoid this mistake by understanding how all your estate and non estate assets are titled and correctly documenting and recording them. Check the title on all of your personal and business assets and reconcile them correctly in your Will.
3. Forgetting Liabilities and Liquidity Requirements
There is not enough cash on hand whilst your estate is being settled, meaning assets may have to be sold at a fire-sale to meet liquidity requirements.
Avoid this mistake by ensuring beneficiaries have adequate cash to cover the time it will takes to obtain probate and if required, find the right buyer for assets that need to be sold.
4. Getting it Wrong
You choose the wrong succession strategy which quickly devalues your estate. A simple ‘I love you’ Will that leaves problems to a surviving spouse is sometimes more trouble than it’s worth. If your beneficiaries don’t have the skills to manage active assets without you (and you haven’t left clear directives) the asset will probably end up being sold to meet the liabilities of your estate.
Avoid this mistake by being realistic about the skills needed to manage the estate without you and plan accordingly.
5. Appointing the Wrong Executor with the Wrong Powers
You choose the wrong executor and give the executor no power to manage active assets such as a business could result in forced sale of assets at substantially less value.
Avoid this mistake by choosing an executor or trustee with the skills and process to carry out your wishes. This may involve finding someone who could continue to run the business to generate wealth for your family or someone with the skills and connections to sell or liquidate the assets effectively.
6. Neglecting Other Agreements
There may be other agreements related to your estate. Without an understanding of the estate and how the estate is structured and the agreements associated within the estate there is no guarantee that the people you want to inherit will actually receive the assets, or proceeds from the sale of the business. In the absence of proper estate planning assets to be disposed of by the executor may not be sold and achieve full value.
Avoid this mistake by structuring your Will to ensure that all arrangements of the estate are in line with your wishes and correctly documented.
7. Misusing Trusts
You have trust provisions drafted in your Will without thinking through the effect on future trustees; wide powers of investment clauses result in costly changes. Trusts in Wills are established to delay or manage assets on behalf of minors or beneficiaries with special needs, so they need to be carefully thought through.
Avoid this mistake by correctly drafting trusts in a Will to specially cater for the special needs and objectives of the beneficiary. Appoint a trustee with the necessary skills and powers to meet the requirements of your beneficiaries as outlined in your Will.
8. Leaving No Room to Challenge
Don’t leave any grounds for your beneficiaries to challenge your Will, meaning they are stuck with what you decided.
Generally, there are seven grounds on which a Will may be challenged:
- Improper execution: an essential requirement of the Will is missing
- Incompetence: the testator (you) did not have capacity to make a Will
- Duress: the testator was under duress or unduly influenced by another to make the Will
- Fraud: the testator was defrauded into making a Will by misleading or deceptive activity
- Forgery: The Will is not the true Will or the signature is not the testator’s signature
- Revocation: Someone claims the Will had been revoked by the testator before death
- Eligible dependency: A dependant may make a claim if not named as beneficiary in the Will or for inadequate benefit under a Will.
Avoid this mistake by seeking professional assistance in the drafting and execution of your Will and ensuring your dependants are adequately catered for.
9 .Setting the Scene for a Fight
Beneficiaries of your estate may have different interests and expectations. So, leaving an equal interest to each of your children (regardless of their interests and expectations) is likely to cause problems.
Avoid this mistake by communicating openly with all beneficiaries — those who are engaged in the estate and those who are not. For children who are not involved in say the business, it may be worthwhile bequeathing other assets or stipulating clear terms by which they may dispose of their interest in your business.
10. Allowing Will to Age
You draft your Will — then set and forget. Some things do not get better with age. Wills that are drafted and then forgotten can lead to estate shrinkage through the unintended sale of assets and administrative costs. This can mean assets of the estate are sold at a depreciated value to raise cash to meet your wishes that are well out of date. Or worse still, changes to your family circumstances may result in unintended beneficiaries benefiting from a Will that is out of date.
Avoid this mistake by regularly reviewing and updating your Will.
Wills Dispute and Estate Planning Lawyers at Pavuk Legal can assist you with a full range of legal services in respect to your Estate Planning needs including preparation of Wills, Testamentary Trusts, Advanced Health Care Directive, Power of Attorney, Binding Death Benefit Nominations, Letter of Wishes, Probate and Management Services post death. With the right tools and processes your Estate Planning desires can be implemented appropriately for both you and your intended beneficiaries.