We all know that having a last will is a way to make certain that your wishes regarding the distribution of your assets are followed. Once you have everything in place, you can breathe easy, right? Before exhaling, take a look at the following common mistakes made in wills. By doing so, you may hopefully avoid some predictable—but entirely preventable—traps.
1. Remember to Update Your Will
You really meant to get around to updating your will after your divorce, the birth of your child, your big move, the start of your now-blossoming business, but you just haven't found the time. The right time is now.
When you have experienced a major life change or change in financial circumstances, such as a move to another state, birth, death, marriage, or the opening of a new enterprise, you must take another look at your last will. Failure to do so could result in unintended bequests and inheritances, and leave your estate in one big mess. The importance of naming guardians for your minor children in the event of the death of both natural parents cannot be stressed enough.
2. Remember to Provide for the IRS
The Internal Revenue Service, as well as your state tax system, is surely on your mind at least once a year—probably mid-April. Add another time: When writing your will, you cannot afford to forget about estate taxes, the laws of which are constantly changing.
One of the most common mistakes people make when they create last wills is assuming that their estates aren't worth enough to come under the estate tax system. The truth is, even though certain property isn't in your estate, it still may be taxable. Assets such as life insurance proceeds, trusts, and retirement plans could be included in your estate for tax purposes.
3. Remember to Appoint a Proper Executor
Your executor will be the one who administers your estate, so choose wisely. If your chosen executor can no longer serve in this capacity for whatever reason (e.g., no longer of sound mind, has moved out of the country), you need to change your will.
4. Remember to Include Intended Beneficiaries
This mistake may or may not coincide with one's failure to update a last will, but regardless, you should very carefully consider who exactly you want named as a beneficiary in your will.
Also, if you are intentionally leaving someone out of your will or providing for distribution in an unusual way, you might want to include why you have done this to prevent challenges after your death.
Another note on beneficiaries: some states prohibit a beneficiary who also served as a witness at the will's signing, so it's usually best to have witnesses who are not named elsewhere in the will.
5. Don't forget to Dispose of Everything
It's important to carefully consider your assets and include a provision for everything that you wish to distribute to your beneficiaries. It is also a good idea to provide some what-if provisions in the event that a named beneficiary cannot inherit as intended (e.g., the beneficiary has died).
Including a residuary clause is a good way to make sure that all of your assets are distributed to your beneficiaries and not taken by the state. This is often called a "leftovers" clause, because it includes just that—those assets that are leftover after items specifically mentioned have been distributed.
If you don't have a residuary clause and you have property left over that wasn't distributed, you have died partially intestate, meaning without a will, and your state laws will dictate where any property not specifically mentioned will go.
Don't let these potential pitfalls keep you from writing a last will—for most Americans, it is the most important document they will ever sign.