Top Nine End-of-Life Planning Mistakes
Mistakes are a part of life. Unfortunately, when it comes to end-of-life planning, we don’t get do-overs. In this week’s tip, we examine the top nine mistakes we and others in our support group made and how you can avoid them in your planning.
Having No Plan – Not having a plan is a plan. “By failing to plan, you are planning to fail,” as Benjamin Franklin once said. If this is currently you, show love for your family and get to work. No need to tackle it all at once. Take it in bite-size chunks. We are happy to help if you need it.
No Life Insurance – We surveyed the widows and widowers in our support group and of the 155 responses we received, 21 percent did not have any life insurance. The reasons varied, but the most common were that they were young and didn’t feel like they could afford it or they thought about it but never pulled the trigger. “We meant to get it. We even got all the paperwork and then never followed through. That sucks,” said one widow. The third most common reason was that a serious illness prevented their ability to get coverage. “We had life insurance at one point but then after a switch in jobs it lapsed. We couldn’t get back on as he had had cancer earlier.”
Not Enough Life Insurance – If I had taken the survey, I would have fallen among the 38 percent who said they had some life insurance, but not enough. One of the widows said, “We had some life insurance but not sufficient. I needed to sell my home and move and go to work to be in a stable place.” I wasn’t forced into that extreme, but oh how I wish I would have listened to my financial advisor a few years previous when she suggested we double or even triple our coverage. I inquired but in the end was too cheap and chose not to pay the higher premium. UGH! I think about that blunder nearly every day.
Relying Solely on Life Insurance from an Employer – While a great benefit, it can also lead to a false sense of future security. Many policies are term policies that expire the moment the employee ceases to work for the company. Also, the coverage amounts are often nominal, $10,000, $25,000 or maybe $50,000, enough to cover funeral and other immediate expenses but not offer any long-term security for the family. One widow learned about this the hard way, ““We had a small company-owned policy through my husband’s work. It was better than nothing. We could have had a better privately owned policy that would have been more helpful.”
Procrastination – Estate planning attorneys can share many stories of families that wait too long to plan. They often receive desperate calls from spouses or children of elderly parents wanting to act quickly because of a diagnosis or accident. While some end-of-life planning can be done in those circumstances, it’s often limited because of the condition of the one who is ill or in the hospital.
Not Updating – Life changes so often that it’s important to reflect those changes in your estate planning. Divorce, the death of beneficiaries, the acquisition of new assets, a move to a new state, a change in employment, and a growing family are some of the more common reasons to update your estate plan. Many ex’s are thankful for the oversight of those who forget to make the updates.
Lack of Communication – This is especially common when one person generally takes care of the financial or legal affairs of the family. They often make changes that impact their family but do not share the information. One widow reported, “I found out he had dropped his life insurance 6 months before he died because he was tired of paying for it.” Not communicating can also lead to family feuds after a death. Family members will often feel entitled or make claims about promises made to them by the deceased. These challenges can end up in court and create rifts that last for years.
Not Understanding the Law – Estate law can be complicated and changes often. Many families will often base their planning on the experiences of other friends and family members or what they read on the internet, not realizing that their apples vs oranges circumstances will result in different and perhaps undesirable outcomes when their plans are carried out. When it comes to planning you and your family’s future after loss, we encourage the use of a variety of resources and professionals to be sure that your affairs are properly in order.
Making Children Joint Owners of Accounts – Be careful about adding others to your accounts. While there may be a good time and place for this, it’s important to understand the risks, aside from their using the accounts for their own purposes. One estate planning attorney recently told us the story of an elderly couple losing nearly all their money because their son was a full user of their checking and savings accounts. The son was involved in a car accident in which he was deemed at fault and the other party sued him. Because the son’s name was on the parents’ account, the parents’ money was subject to the lawsuit. There are other ways to provide those who assist with bill paying and daily living the resources they need. Consider collaborating with an attorney to understand all the options.
