1. “Stale” Documents
Every adult age 19 or older should have a durable power of attorney. This is a document that appoints another person (called your “Agent”) to manage your financial and business affairs on your behalf, particularly if you are no longer able to manage them yourself. The same is true of an Advance Directive, which is essentially a Power of Attorney for Healthcare that appoints an agent to make medical decisions for you if you are no longer able to make them for yourself.
Most powers of attorney do not expire on a given date. Instead, they are usually effective until you either revoke the document, or you die.
As a practical matter, however these documents are only useful if the bank, hospital, physician or other third party will accept it as valid proof of the agent’s authority to act. For example, if you walk into a bank with a power of attorney that your mother gave you in 1981, the bank is more likely to scrutinize the document more carefully than they would if it were dated 2012.
That’s what I call a “stale” document. Technically it’s as effective as the day it was signed. But practically you may run into some problems if it was typed on ancient, yellowing paper thirty years ago.
2. It’s Not a One-Shot Deal
I often see clients who have previously drafted wills or other estate planning documents. But these documents are often seriously out of date.
Unlike the powers of attorney discussed above, your last will and testament doesn’t really get “stale.” It’s a document that is essentially meaningless until your death. The law says that a will only “speaks” at death. This is because you can revise or revoke your will at any time while you are alive, so long as you’re competent to do so.
I cannot tell you how often you should update your will, but I will say this: if your will names a guardian for your children, and those children are in their 30’s or 40’s, that’s probably a good sign that it’s time for an update.
Other reasons to update your estate plan may include marriage and divorce (of you or your children), the birth of new children or grandchildren, or the death of a spouse or other family member. Likewise, acquiring more wealth can be a reason to update your plan.
In sum, estate planning is a process, not something you do once, put in a drawer and forget about it. It needs to be updated from time to time to reflect your current financial and family situation, and your current wishes.
3. Your Estate Plan Might Not Work
When I teach estate planning workshops to the public, I make a point to explain that your will may have very little to do with who actually inherits your property at death. In fact, it may have nothing at all to do with who gets what.
That is because some kinds of property passes “outside the will.” For example, life insurance will pay the beneficiary named in the policy, regardless of what your will says. If you have a retirement account like an IRA, you probably designated a beneficiary to receive the proceeds at your death. Similarly, many jointly owned bank accounts and pieces of real estate will automatically become the property of the surviving co-owner at your death.
The number one problem that will “break” your estate plan is the failure to consider how ownership of non-probate property will pass after your death.
4. You Don’t Know What You Don’t Know
When it comes to estate planning, don’t trust the advice you get down at the beauty shop or the coffee shop. The fact is every situation is different, and just because something worked for one person doesn’t mean it will be the same for you.
I do estate planning work every day, and I’m always learning something new.
Just recently I was surprised to learn that in most cases burial plots do not pass to the beneficiaries under your last will and testament. Instead Alabama law says that the plots go to the people who would have inherited your property if you had died without a will (unless you specifically reference and make a gift of the burial plots in your will).
Most folks aren’t thinking about who will get the leftover cemetery plots after their deaths, and it’s commonly overlooked. But the lots can be valuable, and it can lead to a great deal of confusion over who gets to own them after you’re gone.
Remember, estate planning is something we do for our loved ones—after all they’re the ones who will have to pick up the pieces after we’re gone. So dust yours off from time to time and make sure it’s up to date.