Seven biggest estate planning blunders
What are the costliest money mistakes you can make?
Forget about what happened to your money during stock market collapses or the last downturn in real estate values. You can always recover when these bounce back.
The biggest blunder by far is not having an estate plan, maintains Ed Olkovich, a Toronto estate lawyer and author of Breakthrough Estate Planning. Short-sightedness here can wipe out everything you worked for during your entire life. Once you're gone, you have no chance to recover the loss.
Here are the most common estate planning mistakes you should be aware of:
1. Never finding the time. For many people, estate planning falls under the same category as going to the dentist: Ignore it if at all possible and deal with any uncomfortable problems only when absolutely necessary. Except that's almost always too late.
Are we really too busy or is it that we just don't know how to get started? For most people, the problem is trying to figure out all the answers by themselves, Olkovich maintains — something that's pretty much impossible for most of us. You can, however, make some progress by arming yourself with some basic knowledge about estate planning before you seek out professional help, he suggests.
2. Not having any plan. Many people leave things to chance because they think that because they're not rich, there's really not much to be done. This is a fallacy. Estate planning is important for everyone who is concerned about where their assets will end up upon their demise. Often, when taking the value of a home into account, people are surprised to find that their "estate" is much larger than they thought.
It's also a mistake to think the people you leave behind will automatically manage to figure things out. In every family there will be differences of opinion concerning money. You're looking for trouble leaving someone else to interpret what you want to be done, Olkovich advises.
Of course, if you don't bother making an estate plan, the government will provide one by default. Its idea of what happens to your money leaves no room for your personal wishes, flexibility or tax savings, however. You need to learn how to give away all your stuff to keep the government from doing it for you, he advises.
3. Not making your will. If you fail to make a will, the government writes one for you. You have no say about who is in charge of your estate, which family member gets what share of your money, or how and when it's distributed.
Despite this, people die all the time without having a will, Olkovich says. Often they have no idea what is involved in drawing up such a document or why it's the cornerstone to every estate plan. And quickie kits are no substitute, he adds. Judges are often called upon to interpret homemade will or declare them invalid, he warns.
It's also a mistake to think that a will is the only document that influences your affairs when you die, adds Jean Blacklock, author, along with Sarah Kruger, of The 50 Biggest Estate Planning Mistakes.
You need to understand the impact of such things as joint accounts and beneficiary designations on pension plans and RRSPs, she adds. Many people mistakenly believe that their will dictates where all their assets will go. However, assets like homes and cottages may be owned jointly with a spouse or adult child. While these may be distributed as intended, it's a mistake not to review these items when making up a will.
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