At Valentine’s Day, we celebrate those we love whether our loved ones are our children or grandchildren, spouses, committed partners, or a romantic interest. While flowers and chocolate tend to be the traditional gifts to show “How Deep is Your Love,” a far more significant act of love is a clear estate plan that provides for your sweetheart. A comprehensive estate plan with a Will or Trust, a Durable Power of Attorney, and Health Care Power of Attorney is only the beginning. You’ll also want to ensure you have sufficient life or disability insurance to provide for your loved ones. Finally, you want to check that the beneficiaries you named on insurance policies or IRAs or 401(k)s are still correct. Without these basic protections in place, your loved one could be a “Victim of Love.”
Give yourself a “Peaceful Easy Feeling” and avoid these common estate planning mistakes:
- “I Ain’t Got Nobody” and No Estate Plan: If you do not have any estate planning documents, you’re creating problems for yourself, as well as your loved ones. If you become incapacitated, without a Durable Power of Attorney for finances or a Health Care Power of Attorney no one can legally help you manage your affairs when you are unable to do so yourself. Your family or friends would be forced to pursue a court-appointed guardianship. These guardianship proceedings can sometimes be expensive and, once in place, your guardian may not be able to conduct meaningful asset protection. When you die without a Will in place, your assets may not go to the people you would have intended to inherit your estate. Instead, a state’s intestacy laws will dictate who can inherit from you and how much they can inherit. Here in North Carolina, your surviving spouse could end up inheriting some property from you and have to share it with your surviving children or your surviving parents. In cases where a family member is estranged, they may end up inheriting more than you ever intended for them to inherit.
- “Let Your Love Flow” by Confirming your Beneficiaries: Ideally, you should confirm the beneficiaries you have named on your insurance policies and other accounts that may pass to a named beneficiary on an annual basis. Relationships change over time. A birth, adoption, death, marriage, divorce, or separation could significantly impact who will inherit an asset like a 401(k) or an IRA or a sizable life insurance policy.
- “Torn Between Two Lovers” with an Outdated Estate Plan: Estate Planning Attorneys see outdated estate plans often. In some cases, couples created their first estate plan when their children were first born and don’t update their plans for several more decades. These clients deserve a pat on the back for at least having an estate plan in place. In other cases, clients fail to update an estate plan after a death, divorce, or separation. In all cases, an outdated plan may be costly or could be missing key loved ones who have since joined the family. In one recent case, a husband had written a Will just before he remarried again, but neither his Will nor the Prenuptial Agreement provided for his new wife in any significant way. The husband kept telling his new wife that he would update the Will, but he forgot. When the husband died less than a year after they were married, the wife was distraught that he didn’t leave her more assets, and she sued his estate. Over time, your finances, health, and family relationships change, and all of these factors could impact your estate on your death. Your failure to plan for these changes could hurt your loved ones in the end.
- “What’s Love Got to Do with It” when you DIY a Will or Prenuptial Agreement:In an age where DIY documents may seem convenient and less expensive, DIY documents like Prenuptial Agreements and Wills tend to create a fairly robust business for trust and estate litigators. Even if you get the substantive language correct, you may make a mistake in executing the document, which would render it invalid. In one recent case, a husband died and his second wife found his Will after his death. Instead of updating his Will after his first wife passed away, the husband had simply scratched through that former wife’s name on his Will and then handwrote his new Wife’s name in the same place. It’s likely that the husband believed it was simply a matter of correcting the name of his wife. However, his handwriting had far more costly and problematic implications for his wife. The man’s only daughter, who was the remainder beneficiary under his Will, sued his wife, and the costly lawsuit that ensued could have been avoided if he had consulted legal counsel.
- “How Deep is Your Love” and How Insufficient is your Insurance Coverage: A proper estate plan considers whether your loved ones will be adequately provided for on your death. This aspect is key for household breadwinners. These wage earners should consult with an adviser to see how much insurance coverage is necessary to cover all possible debts and to replace your salary. Your insurance needs shouldn’t just cover your life, you should also work with an advisor to see if disability or long-term care insurance would be advisable. These assets do not just provide you peace of mind to know you’re protected, they will provide peace of mind for your spouse or family members as well.
Estate planning is an act of love that can help your loved one for a lifetime. Planning your estate shows the whole family that you love them and want to protect them. You want to save them a great deal of stress and strife that can occur at death.
So, while there may be “50 Ways to Leave Your Lover,” there are only a few discrete ways to provide for your lover upon your death or disability. Take the time this month to review your estate plan, your existing insurance coverage, and your beneficiaries. If you don’t have a plan in place or your existing plan is extremely old, reach out to review it with an experienced estate planning attorney to ensure your sweetheart is adequately protected.