Estate Planning Is Not Just About a Document – The Biggest Mistake Most People

One of the biggest mistakes people make with estate planning is to assume that estate planning means getting a document. (The biggest mistake is not addressing your estate planning!). Whether it is a will, a revocable trust, living trust, or any other document, a document without a plan is unlikely to protect you or your loved ones. Nor will likely accomplish any of your goals.

So, you paid for a revocable trust and signed it to avoid probate. But you never consolidated assets, documented passwords, nor communicated with the person you named as successor trustee to step-in if you are disabled or die. Your family may still have a mess. Having a dozen or more different financial accounts creates complexity and costs and makes efficient estate administration more costly, time consuming and difficult. A revocable or living trust is a great tool, but you need to do more than just sign a document. You need to organize your assets, document in a safe but accessible way passwords and other critical information. Also, you should communicate with the people you name as successor trustee otherwise how will they know they were appointed and what to do?

You paid a lot of money and have the best will possible. In your will you leave 40% of your estate to your daughter and 60% to your son because he has more children and greater financial need. If you do nothing more, it is theoretically possible that your daughter will not be upset and may not make an issue out of it. But what if she is hurt and takes her disappointment out by hiring a lawyer to sue the estate? Think of the acrimony, legal costs and other problems that could be created. Merely having a legal document is not enough. There are many options for how to address potential conflicts between heirs. Talking may resolve it. You might choose to have your will (revocable trust) leave all assets 50/50 to each child but have a non-probate asset (its transfer on your death is not governed by your will) like a life insurance policy or a retirement account pass to your son. That could accomplish the same financial result without “rubbing the disparity in your daughter’s face.” Good documents are essential. But more is often necessary.

You need a plan. You need to start with your facts: information about family, loved ones and others involved in your plan, financial data, and information about other personal matters that might be relevant. You then need to identify your real goals. These need to be specific to you and not just generalities about saving taxes or avoiding probate. Then the plan is what connects your facts to your goals. That connection or process is what will help you determine what you really need. That will likely include documents, but almost always much more. It will also inform you about what you need in those documents to accomplish your goals. Just getting a document and feeling “one and done” is a false sense of accomplishment.