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Estate Planning Pitfalls: Avoiding Costly Mistakes In Your Estate Plan

Estate Planning Pitfalls: Avoiding Costly Mistakes in Your Estate Plan

Due to the nature of estate planning, it’s important that any errors in an estate plan are identified before it’s too late. By the time the estate plan is executed, the testator has already passed away and is unable to clarify any errors or ambiguities. In this blog, we hope to identify some of the most common pitfalls will-writers make, in the hopes that would be will-writers are better able to avoid these pitfalls.

Choosing the Wrong Executor

The duties of an estate executor are by no means simple and can often be exhaustive. Will-writers should work with their executors to make sure that they know what they’ll be involved with and what the job will entail. The last thing you want is for your executor to do a poor job and fail to meet the expectations of a reasonable executor – harming the interests of the will’s beneficiaries. Further, if an executor is unaware that they were named as your executor, they may renunciate (or decline) the executorship. To avoid this, will-writers should get the approval of their executor(s) before appointing them in the will. Sometimes, it’s also a good idea to name alternate executors in case the primary executor is either not able to or declines to be the executor. For more information, read our blog on choosing the right executor.

Mistake 1: Failing to Frequently Review and Update the Will

If you were keen and prepared your will early, there should be many more life events ahead of you that warrant revisions to your will. Maybe you write your will, then in the future get married, buy a new car, invest in a condo building, or have a child. Whenever there is a significant change in your life (marriage, divorce or the birth or death of potential beneficiaries) or your assets, you will want to modify your will accordingly. To make a change to your estate plan you can either write an entirely new will or you can prepare a codicil. Codicils are best when the changes desired are simple, meanwhile, entirely new wills might be more appropriate when the changes to your life have been more complex and the changes needed are more significant.

Mistake 2: Not Choosing a Legal Guardian for Children

When parents fail to name a guardian in their will, the courts make a decision based on their outside opinion on who will be the child’s guardian.

It’s usually unlikely that both parents will pass away before their children reach the age of 19. While unlikely, it can and does happen in rare circumstances. While it is terrible to contemplate this happening, it is far better to prepare for this tragic circumstance in your estate plan, rather than compound the tragedy, should it occur. If both parents pass away before their children reach the age of 19, a legal guardian will need be appointed to be the caretaker of the children. Parents can name a guardian in their will to ensure that they have someone who they can trust to take on this huge responsibility. For more information, read our blog on naming a legal guardian in your will.

Mistake 3: Not Making a Residuary Clause

Because of the costs to administer the estate and taxes that arise after death, it is often impossible to exactly account for your entire estate in your will. To avoid leaving assets in your estate, not named to any beneficiary, will-writers often make a residuary clause in their will. This usually looks something like, “and with the residue of my estate, it is to be given to my spouse.” If there is no residuary clause, the residue of the estate falls intestate and is distributed according to intestacy laws.

Mistake 4: Forgetting About Digital Assets

In today’s day-in-age, everyone has numerous digital assets – photo collections, social media accounts, email accounts, etc. Just because these assets have no physical presence, doesn’t mean that they should be ignored in your will. Maybe you have a specific person in mind who you know will appreciate a certain digital asset. Sometimes, accounts such as email can be extremely helpful for estate executors as they work to administer your estate. For more information, read our blog on preparing digital assets in your estate.

Mistake 5: Overestimating the Size of the Estate

While it’s not common for people to outright miscount their assets and accounts, people do forget about the taxes and fees that arise after they pass away. After your passing, your estate is still responsible for paying any debts owed and taxes incurred in the time prior to your death. Further, most wills are required to go through probate where, in British Columbia, they will pay approximately 1.4% of the total estate value. To avoid accidentally giving a loved one a minimal piece of your estate, you should familiarize yourself with the fees that your estate will be expected to pay.

Mistake 6: Forgetting About Pets

While pets aren’t considered “assets” in BC estate law, this doesn’t mean you can’t have a plan for them if they survive you. What will-writers can do is name a caretaker for their pets and start a trust account for the pet. This way, you have control over (a) who will keep your pet and (b) the funds available for the usage of the pet. For more information, read our blog on how to provide for your pet in your will.

Mistake 7: Improperly Managing Multijurisdictional Assets

Many people have significant assets in different provinces, or even overseas. For those who do, there is a need to prepare a multijurisdictional estate plan. Different provinces and countries have varying estate laws and this can mean making a will valid in multiple jurisdictions is challenging. To prevent assets in multiple jurisdictions from causing problems, it is wise to create an estate plan that can accommodate the need to deal with out of province or out of country assets. In some cases, this might mean making multiple wills (one in each jurisdiction where there are assets). Other times, it might mean making a single will with specific provisions to properly fit each area’s estate laws.

Mistake 8: Not Specifying a Survivorship Period

By default in BC, there is a 5-day survivorship period. This means that without anything stating otherwise, if a beneficiary of a will dies within 5 days after the will-writer’s death, it is ruled as if they had died before the will-writer for estate purposes and the bequests do not fall to the deceased beneficiary’s estate. Rather, the original will-writer’s other beneficiaries get more of the estate. It’s usually recommended that people extend this survivorship period to the time that they estimate it will take for the estate administration process to complete. For more information, read our blog on survivorship periods. Will writer’s can also specify what they’d like to have happen if a specified beneficiary dies before the will is administered, as an example, a will writer could specify that the share that would have gone to their deceased child be distributed to that child’s children in equal shares.

If you need help preparing your estate plan or simply want someone to review your will, contact an experienced estate lawyer who understands BC’s estate laws. We can help to ensure that there are no mistakes in your estate plan and that your will is executed exactly as you’re intending.

Have a question about this topic or a different legal topic? Contact us for a free consultation. Reach us via phone at 250-888-0002, or via email at info@leaguelaw.com.

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