Many times, estate planning ends up being conducted retroactively rather than proactively. Poorly planned or completely unplanned estates can cause significant financial damages or losses as a result of familial disputes, contractual ambiguity, tax implications, and more. There are several mistakes that first-time estate planners can easily avoid with a bit of awareness and research.
The New Jersey estate planning attorneys at The SC Law Firm in Red Bank, New Jersey have leveraged their combined years of experience to compile their top 5 estate planning mistakes to avoid. Additionally, these estate planning legal experts provide additional insights into common estate planning challenges and how to overcome them.
Mistake #1: Not Discussing Your Estate Plan with Family or Close Friends
While this mistake does not necessarily apply to everyone in all circumstances, discussing your estate plan with those closest to you is generally a good idea for several reasons. First of all, this holds you accountable to developing a formal plan, or at least a workable outline that those closest to you can help formalize. Additionally, discussing your plan out loud to an audience may help you identify potential issues or gaps before committing to finalizing a will, trust, or other estate document.
Having this discussion also ensures that your family and/or close friends are all well aware of what to expect should the plan need to be enacted for any reason. It is important to go about this discussion in the appropriate way though:
Only discuss the estate plan with individuals you trust
Remember to include and openly discuss your estate plan with executors, trustees, and anyone else who is mentioned in the estate documents
Be sure to keep in mind that these discussions are merely for notification purposes - not to listen to opinions and garner feedback - unless you are in the very early planning stages
Ultimately, discussing your estate plans can dramatically reduce the likelihood of disputes or disagreements should your estate plan need to be enacted.
Mistake #2: Not naming Contingent Beneficiaries
While most individuals put considerable thought into the beneficiaries of their wills and trusts, they often make the mistake of naming contingent beneficiaries. Under all circumstances, a comprehensive estate plan should include secondary, fallback beneficiaries of the plan assets, accounts, policies, wills, and trusts.
If an estate plan only has one designated beneficiary for all of the plan's assets, a troublesome situation can arise in the case something happens to the single beneficiary.
However, circumstances can still get tricky, even when nominating additional beneficiaries. For one, the contingent beneficiaries are not actual beneficiaries, and it is unlikely they will receive distribution of any plan assets. Thus, it is a bit awkward notifying these individuals that they are essentially "backup beneficiaries."
Consulting the expertise of a top estate planning attorney in NJ can provide guidance on navigating the tricky conversations and landscape surrounding these decisions. Additionally, if there are more nuanced affairs surrounding your New Jersey estate, speaking to a New Jersey estate planning attorney can provide peace of mind that all of the minutia has been appropriately handled.
Mistake #3: Not Planning for Final Arrangements
The final arrangements of an estate include preparations for funeral services and any applicable burial conditions, all of which should be clarified from the onset of the plan. While these items are arguably among the most important and prominent elements of an estate plan, many individuals make the mistake of overlooking them - likely due to the morbid nature of planning for one's death.
However, as uncomfortable as this may be to consider for yourself, failing to plan for final arrangements can cause exponentially more discomfort for family members and close friends. Those closest to you will need to ascertain and impose their opinion about how you wished to leave the world while simultaneously trying to grieve and come to terms with the loss.
As an appendix to this, your estate plan should also clarify what type of end-of-life care you wish to arrange. For example, will you prefer to spend your final years at home with in-house care, or in a facility such as an assisted living or hospice center. Again, as uncomfortable as these things may be to consider for yourself, planning for them in advance eliminates the potential for that discomfort to get transferred to those you care about most.
Mistake #4: Failing to Factor In Owned Digital Assets
The world has become increasingly digital in terms of digital assets and digital capital, but some individuals are still late to the party. An increasingly large number of New Jersey residents are holding some form of digital assets, but most fail to give them commensurate attention - if any attention at all - in their estate planning.
Digital assets include items such as digitally-transacted capital assets (stocks, bonds, alternative investments, etc.) cryptocurrencies, social media account assets, online bank accounts, owned web-based or app-based properties, and more.
These individuals run the risk of completely forgoing the distribution of any digital asset classes to the beneficiaries designated in their estate plans. In some cases, this omission may be due to forgetfulness or lack of awareness, while it may also be intentional in instances where the assets aren’t serious in nature.
However, whatever the case may be, it’s always best to protect all your interests and factor in all digital assets when creating an estate plan. Most skilled estate planning attorneys will even recommend incorporating a separate digital estate plan within the overall estate plan. Keep in mind that if you decide to go this route, you may then need to designate a digital executor to manage this separate portion.
Mistake #5: Not Planning for Disability & Long-Term Care
Many people simply don’t think about long-term care and the risk of potential disability during periods of strong health. However, these are both legitimate components of a comprehensive estate plan that should be present in a will or trust. The estate plan is only complete when you factor in the entirety of your life – and that includes both long-term care as well as the risk of any injury or illness that can lead to partial or total disability.
How Do Long-Term Care & Disability Fit Into an Estate Plan?
Long-term care generally includes services such as in-home nursing care, long-term assistance in a medical facility, or comprehensive care in a nursing home or assisted living facility. Medical bills from long-term care arrangements can easily consume a large portion of assets planned for retirement or distribution to loved ones, potentially rendering a will or trust worthless due to exhausted asset funds. By planning for long-term care that may be required in the future, you can implement protections like insurance and other investment vehicles to protect your primary assets.
While becoming physically or mentally disabled at some point in the future isn’t a welcoming thought, these are important possibilities to consider when developing a comprehensive estate plan. These scenarios are unpredictable and very difficult to deal with if no plan is in place, so it’s best to consult an estate lawyer and designate a power of attorney to execute wishes on your behalf in the unlikely event you become partially or completely disabled. This person will be responsible for making financial and other decisions during any period where you are unable to do so yourself. Having a trustworthy power of attorney is critical in ensuring your wishes are properly executed if you are incapacitated.
Final Points on Estate Planning in New Jersey
Though there are many more mistakes not covered here, this top five list will help most individuals who are planning their estate avoid the most detrimental scenarios. Some additional, lesser mistakes can include:
Not keeping updated documents
Failing to identify healthcare representatives in a will, Failing to mention charities or desired charitable contributions
Failing to create investment vehicles to plan for your children
Forgetting to factor in taxes
And many others
The biggest mistake though, is not having any estate plan in place at all. The best way to learn more about developing your plan and to understand and avoid all of the possible mistakes along the way, is to interview and hire an experienced NJ estate attorney.
Your attorney will also help you continue to adjust and adapt your estate plan after every major life event. Alternatively, you and your attorney may choose to set a cadence to revise the plan every several years, as you both see fit. If you are ready to begin the estate planning process, contact the estate planning attorneys at The SC Law Firm - our legal team will help you develop the best estate plan for your given circumstances.