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Avoid These 9 Top Estate-Planning Errors

on Monday, 20 July 2015. Posted in Investments, Blog, Life Insurance

Estate planning is a complicated yet necessary task. Because of complex laws, misinformation online, and others’ scary stories, making mistakes unknowingly is easy. Unfortunately, that tasks your heirs with sorting out your unintentional mess after you’re gone.

You can avoid leaving a legal dispute or tax problem as your legacy by working on your estate plan with an Alliance Financial advisor. To protect your assets and distribute them according to your wishes, be aware of these frequent errors.

1. Not Formalizing Your Decisions

An estate plan is imperative ― despite your financial situation, age, and marital status. It’s your opportunity to decide how your beneficiaries should divide your resources after your passing. Declaring your wishes clearly will prevent confusion and disagreements among your successors.

2. Skipping a Will

If you don’t have a will, you’ll die intestate. Law determines which parties get what asset portions ― despite your wishes otherwise. That can be problematic, particularly in blended families. Matters can become even trickier when your heirs reside in other provinces. To avoid those issues, delays, and additional expenses, make drawing up a will a priority.

3. Thinking a Will Is Sufficient

A will doesn’t cover every essential. It excludes items like joint bank accounts, investments with designated beneficiaries, and jointly owned ventures and/or properties. Your will won’t tell your survivors how much capital gains tax they must pay and how. So consider your overall financial worth and responsibilities.

Designate people as Registered Retirement Savings Plan (RRSP) and pension beneficiaries instead of your estate, which can tie up your money longer. If you don’t have adequate life insurance, consult your Alliance Financial advisor for recommendations to meet your unique needs. We offer various life insurance options from term to permanent plans.

4. Leaving Your Total Estate to Your Spouse

Your natural inclination to provide for your mate may include leaving him or her everything. That assumes that your spouse will bequeath all remaining resources to your mutual children who will hand them down to your grandchildren eventually. However, transfers don’t go that smoothly always. If your spouse remarries and leaves your assets to a new partner, your children get nothing. Consider establishing small trusts for your grandkids’ education or distributing cash gifts during your lifetime.

5. Appointing an Unsuitable Executor

Before choosing a close relative or friend to settle your estate, realize that the average person has no experience with that responsibility. Instead, treat that role as a specialized job. A qualified executor’s health should be better than yours with expectations to outlive you. Choose a knowledgeable adult with spare time who excels at math and communication skills. If family and friends don’t meet those criteria, you can hire a third party like an accountant or lawyer to handle that task. When assigning two or more executors, be sure that they’ll work together well.

6. Overlooking Advance Directives

Addressing important health issues when you’re still able to evaluate your options is vital. How far do you want doctors to take life-saving measures? Whom do you trust to make decisions regarding your care when you can’t? Establishing your health care proxy, power of attorney (POA), and living legally will help ensure that others follow your wishes while easing your loved ones’ final decision-making burdens.

7. Not Having Cash Available

Securities or other assets that you can’t sell or exchange for cash easily and quickly without substantial value losses can create financial complications. Cash from your investments, insurance policies, and properties won’t be available immediately after your death. But keeping some liquid assets will allow your inheritors to pay for your final expenses promptly.

8. Failing to Review Your Estate Plan

Revisit your estate plan regularly but especially when family circumstances, legislation, or tax laws change. Major life events like divorce, beneficiary death, marriage, or new children necessitate revisions with possible will updates. If applicable, replace your parents or siblings as beneficiaries when your children reach adulthood.

9. Keeping Disorganized Records


Good document organization will help whoever must manage your finances and/or estate suddenly. Keep originals in a bank safe deposit box and categorize copies at home. Label files containing your estate plan, will, advance directives, statements, and instructions. Create your net worth record that details your assets, debts, and expenses. Compile a list of your bank accounts, investments, and insurance policies with contact details for your bank, safe deposit box, financial planner, and lawyer. Your loved ones will appreciate your organizational efforts alleviating the stress of their new roles.

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