Six Big Mistakes People Make with Their Wills

Transcript of Podcast Episode 226

Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, 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. You want to leave $1 million to your favorite charity and the rest to your two kids. But what happens if, over time, the total value of your assets drops to $2 million. Are you comfortable with your kids absorbing all of that loss in value?

This is why you need flexibility. Your will needs to be structured to avoid unintended consequences.

5. Leaving Cash in the Wrong Hands

For obvious reasons, there are issues with a minor child getting a significant amount of cash. In many states, a court can appoint a conservator for the benefit of a minor who inherits a sum of money.  The conservator manages and controls the assets until the minor reaches adulthood.

But it’s not just young children you need to worry about. There are also adults who are simply irresponsible, as well as others who face difficulties that make it unwise to provide them with a large sum of cash.

Rather than leaving a mess behind them, many people prefer to set up a trust in their will that will take effect at their death.

And finally…

6. Not Communicating Properly

Perhaps not surprisingly, money can bring out an ugly side in some people. There’s a good chance that whatever you decide, someone is going to feel shortchanged, whether the feeling is justified or not.

How do you deal with something like this? One way is to recognize that information is critical. Conflicts can flare up when one or more parties are surprised by what the will says. So you need to talk things over, and it’s best to do so before you sign the will. This could give you a chance to head off any ill feelings before it’s too late.

Life Insurance Can Help

A properly structured life insurance policy can go a long way to help your heirs feel more loved and respected. It also may help provide the funds needed to pay the costs associated with probate and to help meet your financial objectives.

Unsure of where to begin? Your Security Mutual life insurance advisor can help.  Contact your Security Mutual life insurance advisor today to review your goals and objectives for yourself, your family, or for your business. Your Security Mutual life insurance advisor will work closely with your tax and legal advisors to create a plan that best fits your goals and objectives.

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®. The content provided is intended for educational and informational purposes only. Information is provided in good faith. However, the Company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information.

The information presented is designed to provide general information regarding the subject matter covered. It is not to serve as legal, tax or other financial advice related to individual situations, because each individual’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation.

To help reach your goals, you need a skilled professional by your side. Contact your local Security Mutual life insurance advisor today. As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives. For more information, visit us at SMLNY.com/SMLPodcast. If you’ve enjoyed this podcast, tell your friends about it. And be sure to give us a five-star review. And check us out on LinkedIn, YouTube and Twitter. Thanks for listening, and we’ll talk to you next time.

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