17 Estate planning mistakes to avoid

Guides

Sticking your head in the sand and avoiding discussing or dealing with estate planning can lead to future complications, confusion, financial loss and even heartache for your loved ones.

Making sure your estate (e.g. everything you own including cash savings and property) is properly organised and protected can allow you to rest easy knowing you’ve done absolutely everything possible to secure your loved ones’ inheritance, and leave them with a financially secure future.

There are a multitude of estate planning mistakes you can avoid, just as long as you’re aware of them and take heed of the invaluable advice given below.

Here we fully explain, in jargon-free plain English, 17 estate planning issues you should avoid making at all costs.

What is estate planning?

Estate planning is a blanket term used to describe all aspects of financial planning for the future encompassing what will happen to your financial assets (such as property and shares or your hard-earned savings) when you die.

Estate planning can also include making arrangements for someone else (called an Attorney) to legally take over managing your financial and property or health and welfare decisions should you become incapacitated (i.e. you are no longer capable of making decisions in your best interests).

Estate planning can include:

17 mistakes and estate planning issues you can and should avoid:

1. Leaving it too late

Many people who put off dealing with uncomfortable subjects like who gets what when they die can very often end up in the unenviable position of trying to make these important decisions on their deathbed. Or, worse still, leave it too late and do not get the opportunity to decide at all!

If you have anyone at all that relies on you financially and, should you die, would seriously struggle to manage, not just emotionally but financially too, then estate planning is something you should tackle immediately without delay.

You can never be too young for planning ahead but you can be too old.

2. Thinking a Will isn’t necessary

If you rent a property and don’t have any assets or savings, you may think writing a Will isn’t necessary or worthwhile. But you’re wrong.

Just because you don’t have much to leave it doesn’t mean that writing a Will isn’t important as there may be certain personal possessions such as jewellery, ornaments or a family heirloom you want to leave for a certain special someone.

The only way to make sure a close relative or friend receives what you’d like them to is by setting out your wishes in a legally binding Will.

If you don’t make a Will, you will die ‘intestate’.

Read more: What happens if you die intestate in the UK?

3. Overlooking a Power of Attorney

5.3 million Power of Attorneys are registered with the Office of the Public Guardian but when there are almost 11 million people who are aged 65 or over in the UK, this figure indicates many of us are continuing to ignore how important this legal arrangement is.

If you lose capacity (i.e. you’re not mentally capable of making the right decisions for yourself) and fail to make a Power of Attorney for your health and welfare, it can be left up to health professionals to make those decisions for you.

And if you lose capacity without having made a Power of Attorney for your property and financial affairs and an important decision needs to be made, then the Court of Protection can oversee the appointment of a Deputy (effectively the same as an Attorney but with fewer powers and more fees). This retrospective type of application for an Attorney can also be done in relation to health and welfare arrangements.

Anyone over the age of 18 can apply to be a Deputy but there’s an application fee of £365, an assessment fee of £100 and a £320 annual supervision fee.

If no one is willing or able to be your Attorney, then the Court of Protection may instead instruct and employ the costly services of a professional Deputy (typically a Solicitor or an Accountant) whose ‘powers’ are limited (compared to those afforded to an LPA appointed Attorney) and for which there is an annual fee of up to £2,500 to renew their deputyship.

These complex processes that your family may have to deal with are stressful, costly and drawn out and can all be avoided by simply preparing an LPA while you still can.

You can arrange a Lasting Power of Attorney with Wills.Services for only £175 for one type of LPA or just £295 for both - find out more here.

4. Not making a Living Will (DNACPR)

If you fail to arrange a Power of Attorney for health and welfare decisions, then you should at least consider making what is known as an Advance Statement or Decision (formerly known as a Living Will and more recently named a DNACPR).

One of the key decisions you can make in a DNACPR is whether or not you wish to be resuscitated. Some of us hate the idea of being successfully resuscitated only to be left with life-changing, debilitating health issues and a very poor quality of life.

Note: If you subsequently appoint an Attorney for health and welfare, an LPA will override a DNACPR.

You can find out more about living wills here.

5. Not updating your Will

While most well-written Wills cover most bases and eventualities, there are always changes in life that mean updating your Will is necessary.

For example, life-changing events such as a divorce, birth or death, or changes to estate planning laws or your financial circumstances, all mean you should periodically review your Will and update it, where necessary.

6. Only naming one beneficiary in your Will

There may be only one special person in your life who you’d like to inherit your entire estate but should they die before you, your estate will simply pass to your next of kin.

If your ‘next of kin’ is a relative you have nothing to do or, worse still, despise, is this a chance you really want to take?

You should always name a ‘backup’ beneficiary in your Will - even if it’s a charitable organisation - to make sure your money goes to someone or something that means a lot to you and is close to your heart.

7. Only naming one executor in your Will

Again, only naming one executor in your Will is foolhardy and not recommended; at least two executors are normally chosen.

If you haven’t a close friend or relative who you would like as a second executor, then you can appoint a solicitor to act as a joint executor. And, should your first chosen executor die, then your solicitor can still oversee your estate administration.

8. Avoiding uncomfortable conversations with loved ones

A key reason many of us fail to plan for the future is that it’s such a morbid and uncomfortable subject to discuss with our loved ones.

However uneasy you feel about bringing up the subject of death, you must know that this feeling is nothing compared to the potential fallout for your loved ones as a result of you not planning for their future.

To protect your loved ones, let them know your wishes and discuss your plans with them.

For more advice read: Talking to your family about your Will

9. Trusting loved ones to do the right thing

Horrible as it is to say, can you rely on your family to amicably agree on who has what when you’re gone? I don’t think anyone can soundly answer “yes” to this question unless they have a crystal ball to see into the future.

To avoid family arguments (especially between siblings) and unnecessary stress for your loved ones, it makes sense to document all of your wishes so all of this kerfuffle can be avoided.

10. Choosing the wrong executor/s, beneficiary/ies, trustee/s or Attorney/s

When choosing an executor, beneficiary, trustee or attorney, you need to give careful consideration to who you choose and also think about ‘backups’ in case your first chosen executor, beneficiary, trustee or attorney, dies before you.

Above all else, make sure you choose someone you trust implicitly who is likely to outlive you.

11. Trusting a joint property owner to protect your children’s inheritance

If you jointly own a property, when you die and regardless of what you may have written in a Will, your half share in a property automatically passes to the surviving owner.

This means that without proper planning, your child/ren’s inheritance isn’t safe and you can only rely on the surviving owner ‘doing the right thing’ and making sure the proceeds of your share in the property go to your child/ren when the surviving owner dies.

Other ways you can protect your child’s inheritance is by setting up a Child Trust Fund or appointing a Guardian.

12. Not considering Inheritance Tax implications

If you think there’s any possibility that your ‘estate’ (all of your worldly belongings, assets, property, shares, cash, etc) may exceed the Inheritance Tax (IHT) threshold of £325,000, there are ways you can protect your loved one's inheritance being gobbled up by government taxes.

Read more: Inheritance Tax planning guide - how to avoid IHT

13. Not having mortgage life insurance

Similar to jointly owning a property and not making sure your share in it passes to your children (mistake no. 10 above), not having life insurance in place to pay off your mortgage - should you die before it’s paid off - could be a HUGE mistake.

If you leave behind loved ones who are financially incapable of paying the mortgage, their family home may be put up for sale or repossessed, and they could end up homeless.

Read more: What happens to my house and mortgage if I die?

14. Overlooking digit assets

In this modern world, many of us completely forget that we may have digital assets such as online bank accounts or business websites that may need protection or access to. Click on the blue link to find out more.

15. Not making provision for what happens to your pets

Pets are members of the family too but are very often overlooked when it comes to estate planning. Don’t make this mistake and leave it up to an animal charity to rehome your pet - instead, name a chosen pet guardian in your Will.

16. Forgetting about your favourite charity

If you have a charity that is close to your heart - for example, perhaps MacMillan Cancer Support supported you and a relative through a harrowing time - then don’t forget you can easily leave a gift to one or more chosen charities in your Will.

17. Not seeking professional legal advice

To avoid estate issues, if you’re not a legal professional then you should not attempt to write your own Will or undertake any other estate planning without first speaking to a legal professional.

Along with the obvious potential contentious issues (family arguments) that may occur in relation to the distribution of your estate, if you make a  mistake on an LPA form, The Office of the Public Guardian (OPG) will reject the form should it be submitted for registration. The OPG says that around 15% of LPA forms submitted to them have errors.

Ideally, all important legal documents such as Wills, LPAs, Trusts and Living Wills should be professionally prepared by a legal professional, properly signed in front of witnesses and stored in a safe and secure location.

If you would like impartial, no-obligation advice and a general chat about estate planning, simply complete our contact form and a member of Wills Services’ professional legal team will contact you.