Estate plans are not just for the rich and famous, but their celebrity highlights and indeed exaggerates powerful estate planning lessons that can apply to everyone.
We were all shocked that Aretha Franklin died intestate. One would assume that someone so accomplished, with considerable wealth, and who most likely had access to a team of advisors, and who had an adult child with special needs would have formalized her wishes for her estate. We can only hope that the courts and her family won't have too much difficulty locating all her property and assets so that they can tidy up the estate for beneficiaries in the best possible way and as soon as possible.
The vast majority of Nigerians do not have an estate plan in place. Do you? Your lovely family might seem so close knit, and you feel certain that absolutely nothing can go wrong. Yet so much can. Here are some estate-planning mistakes for all to avoid:
1. Not having an estate plan.
The biggest single estate-planning mistake is not having one. There are several estate planning tools so it is inexcusable to do nothing. You have loved ones, people you care about. Why would you put them through so much stress in addition to the grief of losing you; it leaves them in a shroud of uncertainty and confusion. Without specific instructions from the deceased, an estate may be subject to long drawn-out court battles as family members fight for what they feel should be their share.
A will is the simplest estate-planning tool. It is simply a letter of instruction appointing someone to be in charge of your estate and specifying how you want your estate to be distributed or divided.
2. Don't die intestate
If you die intestate, that is, without a will, the expensive probate process kicks in; it is also fraught with long drawn out delays. Why give away significant sums from your estate after having built assets over a lifetime of hard work.
Your estate will be distributed according to the laws of intestacy. This could be devastating to your spouse and children.
Family members and the courts will decide who will raise your minor children. This may not be the person that you would have wanted to raise your kids particularly if you are a single parent.
There is a fear of dwelling on our mortality that makes people postpone this important task even though it is the surest thing of all. We cannot wish it away. If you are young and single and have no dependents and haven't gotten round to doing anything about your estate, you can probably be forgiven, but only for a while. Many young singles are building extraordinary businesses that are built to last. Anyone with significant assets, and a family to protect; children or a spouse, should at least have a will and as early as in their 30s or 40s.
4. Not planning for minors and young adults
Do you want money to go outright to your children? If they are minors, their guardian (someone you didn't select, will be making all financial decisions on their behalf. Select a guardian for your minor children.
Young adults may get unfettered access and control of their inheritance from the tender age of 18. Most 18 year olds are not equipped to make the right financial decisions particularly for large sums of money. In addition, inheriting too early has its challenges and makes it difficult for some children to be motivated or driven to success. Indeed, they are more likely to finish their inheritance in a short time.
A trust is an outstanding estate-planning tool; it avoids probate, and enables the seamless transfer of wealth to loved ones, controlling the long-term distribution of your assets. With all wishes clearly spelt out, beneficiaries inherit directly and expenses are minimised. An important advantage is that designations of your assets are private. By relying primarily on a will, bequests are public as wills are filed with the courts as a public record.
5. Leaving untidy records
Are your financial records disorganised? You can imagine a family in grief having to go through the stress of trying to find a will or other evidence of estate planning. If you are the primary or sole breadwinner, surely our spouse should have an idea of where your money is.
Keep your documents organised and secure. Where are your bank statements, brokerage statements, insurance policies, title documents, etc.? We are taught to guard our passwords and screen names jealously. Does anyone in the world have access to these?
What is the point of having a will if it cannot be located? A will should be kept securely but where it can be found. Courts might assume that there is no will and then the long probate process begins.
6. Failure to update an estate plan
Signing a will is just the beginning of the process, not the end. Things happen; life is full of events and estate planning documents and beneficiaries should be updated as your financial and personal situation changes. Failing to periodically update an estate plan or make changes to beneficiaries after a marriage, birth, divorce, remarriage, death or other life changes can cause problems; this could include disinheriting heirs. Buying and selling property or a business requires that changes are made to your will or trust.
A successful young man forgot to change the designation on his insurance policies; he had put his father as sole beneficiary. His wife and three children inherited nothing. Beneficiary designations on retirement accounts or insurance policies should be reviewed to be sure they are actually in accordance with your wishes.
7. Not putting your wishes in writing
It is important to put all bequests in writing if you want them to happen. Alleged promises to "trusted" servants or extended family members can lead to a lawsuit being filed against an estate.
8. Not planning for estate taxes
Poor estate planning will force your heirs to have to sell valuable property or precious items because they just don't have the liquidity to pay those taxes. With careful planning taxes can be minimised whilst legal obligations are met.
9. Failing to be clear about keepsakes and heirlooms
Individuals often fail to be specific about personal property in their estate planning, which can lead to fights over precious family heirlooms, artwork and other items of sentimental value, from a tablecloth to a rug or tea set!
Which items should go to whom? Don't assume that your children will "just share all your personal effects equally," without squabbling. Be as specific as you can, particularly for keepsakes.
10. Not leaving instructions for your funeral
How do you want your funeral to be? Did you know you can say who attends and who doesn't?! If you wish to be buried like royalty, do designate funds specifically for that purpose so that you can have a "befitting" funeral and your descendants don't go into debt or bankruptcy from funeral expenses.
Intestacy often leads to ugly public family feuds. Do the right thing. Tidy up your affairs. Don't leave your life's work to chance. Plan instead to leave a lasting legacy.