Preparing an estate plan is like getting a physical. We know responsible adults have it done but choosing to do it yourself is just not appealing. We may decide with the information available on the internet, we simply can self-diagnose any problems that arise.
Unfortunately, health and legal issues have an abundance of both good and bad information floating around. In the estate planning realm, we often see major planning problems arise because of three incorrect assumptions.
First, the roles of power of attorney agent and executor often are confused. A power of attorney agent acts in accordance with a lifetime document. Your power of attorney is an appointment made by you and does not have to be anything more than the validly executed document. The power of attorney only grants authority to someone to act during your lifetime and it expires upon your death.
An executor, on the other hand, is a person you nominate to handle matters after your death, pursuant to your last will and testament. Your executor is nominated by you, but that nomination is not actually effective until the executor is appointed through a court order.
Therefore, the executor cannot act for you until two things have happened: you have died and a court has reviewed your will and appointed someone to handle your estate.
You may appoint the same person in both roles, but simply executing one will not give someone the power they need to handle your estate both during your life and after your death.
Second, too many people choose simplicity over necessity when preparing an estate plan. We often hear someone wants a “simple will.” This is document-based planning, not goal-based planning. Every estate plan should be prepared with consideration of the individual’s health, family and specific financial situation. Many problems which arise in probate are preventable with good planning.
Third, the biggest mistake we see in estate planning is assuming everything will stay the same. This is a foundational mistake which can lead to significant problems during your lifetime and after death. If you are healthy, it may be difficult to imagine a time when you may not be. If your loved ones are thriving, planning for their disability may not even be a thought.
Life is not stagnant. In the words of the Greek philosopher Heraclitus, “The only thing that is constant is change.”
Realistically, family dynamics change with time and those changes beget more changes. There will be sicknesses, deaths and births. Relationships will change over time. Your health and the health of loved ones may decline or improve.
Planning based only on your current circumstances will force you into frequent estate planning changes, or worse, may cause a failure when the documents are most needed. Be willing to consider potential changes. Anticipate your own incapacity and potential for needing long-term care. Prepare documents that include backup beneficiaries, disability provisions, and successor fiduciaries.
When preparing your estate plan, make sure you create documents that accomplish your goals now while anticipating future changes.