We all know that having a Last Will is one way to make certain that your wishes regarding the distribution of your assets are followed. Once you have everything in place, you can breathe easy, right?
Well, maybe not! Here are some common mistakes people make in wills. These mistakes are more common than you might think. Even esteemed Chief Justice Warren Burger made a mistake. When he died in 1995, he failed to provide for estate taxes and to include a grant of powers to his executors in his self-written will costing his estate thousands of dollars.
1. Failing to Update Your Will
You really meant to get around to updating your will after your divorce, the birth of your child, the start of your new business, but you just haven't found the time. The time is now. When you experience a major life change or change in financial circumstances, such as a birth, death, marriage, or the opening of a new enterprise, you must take another look at your will. Failure to do so could result in unintended errors and leave your estate in turmoil. You also need to nominate guardians for your minor children in the event of the death of both natural parents.
2. Failing to Provide for the IRS
While California has no inheritance tax (at least at the present time!), the Internal Revenue Service is more than happy to take 40% or more of your estate if you don’t plan properly. One of the most common mistakes people make when they create their will is assuming that their estate isn't worth enough to come under the estate tax system. The truth is, even though certain property isn't in your estate, it still may be taxable. Assets such as life insurance proceeds, trusts, and retirement plans could be included in your estate for tax purposes. Also, over time, property values can increase, and the size of the estate tax exemption changes.
3. Failing to Appoint a Proper Executor
Your executor will be the one who administers your estate, so choose wisely. If your chosen executor can no longer serve in this capacity for whatever reason (e.g., no longer of sound mind, has moved out of the country), you need to change your will. You also need to grant certain powers to your executors, such as selling assets, and operating under the California Independant Administration of Estates Act.
4. Failing to Include Intended Beneficiaries
You should very carefully consider who exactly you want named as a beneficiary in your will. If you are intentionally leaving someone out of your will or providing for distribution in an unusual way, you might want to include why you have done this to prevent challenges after your death. Another note on beneficiaries: some states prohibit a beneficiary who also served as a witness at the will's signing from taking under the will, so it's usually best to have witnesses who are not named elsewhere in the will.
5. Failing to Dispose of Everything
It's important to carefully consider your assets and include a provision for everything that you wish to distribute to your beneficiaries. It is also a good idea to provide some what-if provisions, say, in the event that a named beneficiary cannot inherit as intended (e.g., the beneficiary has died). Including a residuary clause is a good way to make sure that all of your assets are at least in someway distributed to your beneficiaries and not taken by the state. If you don't have a residuary clause and you have property left over that wasn't distributed, you have died partially intestate, meaning without a will, and your state laws will dictate where any property not specifically mentioned will go.
Don't let these potential pitfalls scare you off from writing a will in the first place. For most of us, it can be the most important document you will ever sign.
John L. Gorman III is an experienced, estate planning attorney with offices in Modesto, California. He has been voted “Modesto’s Favorite Lawyer” in the Modesto Bee Poll three years in a row. He can be reached at (209) 548-4000.
This article represents only the general opinions of John L. Gorman III. It is intended only for general information and not as legal advice for any particular situation. If you want legal advice, you should contact a lawyer.