Are You and Your Clients Making These Estate Planning Mistakes?

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A recent survey by Caring.com found that only 42 percent of U.S. adults have estate planning documents in place.

The survey asked participants why estate planning documents hadn’t been established yet. Twenty-nine percent said they have no one to leave assets to, and 47 percent said they simply hadn’t gotten around to it yet, according to the AARP article, “Haven’t Done A Will Yet?”

Not Having a Will

“The biggest estate planning mistake I see people make is not having a plan at all,” Eric Roberge, CFP®, founder of Beyond Your Hammock, told U.S. News and World Report.

About 52 percent of U.S. adults have not made a will, according to BMO Wealth Management. A will is essential to an estate plan, but it’s not enough, writes Bob Carlson in the Forbes article, “7 Big Estate Planning Mistakes.”

Only Having a Will

In addition to a will, other documents need to be in place for an estate plan to be thorough. These include power of attorney, trusts and advanced medical directives.

Neglecting health care power of attorney is also a common estate planning mistake. A health care power of attorney is “all about you, before you die. A will is only about dividing up your property when you’re not around,” lawyer and author Sally Hurme said in the AARP article.

Without determining the person who can make decisions upon incapacity, or stating your wishes in a legal document, state or local law will determine who gets to make these decisions.

Not Updating Beneficiaries

Estate planning mistakes aren’t reserved only for clients, as Nancy L. Anderson, CFP®, wrote in Forbes. Anderson shared how she had divorced her husband when her children were ages 2 and 4, and changed her IRA beneficiary to her father. Twenty years later, she realized she hadn’t updated that, despite her kids being grown.

“If I’d passed away before making a change, it could have been a disaster for my family,” Anderson wrote.

Neglecting Digital Assets

This has been on the radar for a few years, but recently came to the forefront when the CEO of QuadrigaCX, a Canadian crypto exchange, died in December without giving the password to offline cryptocurrency wallets to anyone. Customers with $190 million in cryptocurrency stored with QuadrigaCX might not see their investments again. While neglecting digital assets likely won’t cause your clients’ heirs millions, this is a reminder to not ignore them.

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Ana Trujillo Limón is senior editor of the Journal of Financial Planning and the editor of the FPA Practice Management Blog. Email her at alimon@onefpa.org, or connect with her on LinkedIn

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