14 mistakes not to make with your will

By Liz Pulliam Weston

Wills do more than distribute our stuff after we die. They also give our heirs a final, lasting impression of us and our intentions. That can be a good thing, if we've planned carefully and executed our estate plan meticulously. Or it can be a disaster, if we've made one of these common blunders:

Not having a will. All of us have something we care about: our spouses, our kids, our pets, the unrestored '66 Mustang in the back shed. Not having a will means the state decides what happens to them. That can leave survivors vulnerable to contentious lawsuits, confusion and the heartache that we didn't love them enough to plan for their futures, said attorney Colleen Barney, co-author of "Best Intentions: Ensuring Your Estate Plan Delivers Both Wealth and Wisdom." If you really don't have much or don't expect anyone to fight over what you have, will-making software can do the trick. If your estate is larger or your family is contentious, invest in a lawyer's help. A simple will should cost about $200. A more complicated estate plan, including a living trust, can run $1,500 or more.

Not updating a will. Life is nothing if not change. Your family, possessions and wealth can grow and shrink. The rules can vary as well: Congress is constantly fiddling with estate tax laws, while court and IRS cases can alter how those laws are interpreted. Each state has different laws as well. Have your will reviewed after every major life change and interstate move. If your estate is large enough to worry about estate taxes ($3.5 million in 2009, but scheduled to disappear in 2010 before reverting to $1 million in 2011), reviews would be appropriate at least every few years and again after major estate tax legislation. For more on the estate tax, see "2010: The best year to die?"

Naming the wrong executor. This job, as I detailed in "Executors can inherit an unholy mess," is a real pain in the patoot. You need someone who is calm, honest, organized and, most importantly, willing to serve, said Blanche Lark Christerson, a director in the Wealth Planning Strategies Group for Deutsche Bank Private Banking. Make sure you discuss the job requirements with your candidate and get his or her consent first, then include an alternate or two. Also, consider naming someone younger than yourself, particularly if you're getting up there in years. You want to lessen the odds that your executor dies or becomes incompetent before you do.

Naming couples to serve as guardians. Your sister is great with kids, but what if she divorces or dies in the same accident that claims you and your spouse? Are you comfortable having your children raised by your beer-swilling brother-in-law and whoever he marries next? If the answer is yes, name your sister as your first choice for guardian with your brother-in-law as backup. If not, find another alternate. For more information on how to make this important choice, read "Who will take care of your kids if you die?"

Checks and balances

Naming the same person to serve as guardian and trustee. Skills with children and money aren't mutually exclusive. But the person you may trust most with your children could be hopeless with managing finances, said attorney and author Jon Gallo. Having separate people as guardian of the kids and trustee of their money can put an important check-and-balance system in place; it will be tougher for your guardian to burn through your child's money, for example, if he has to justify his bigger expenditures to an outside party.

Leaving too much to a spouse. This is by far the simplest choice, but may not be the best for at least two reasons. First, if you have children, you'll lose control over what happens to your assets if you bequeath them outright to your spouse, notes attorney Gerald Condon, co-author of "Beyond the Grave: The Right Way and the Wrong Way of Leaving Money to Your Children (and Others)."

She could very well leave everything to her next spouse, for example, or the televangelist she becomes devoted to after your death. (Remember, just because she's competent now doesn't mean she won't get a little dotty later, and challenging a will can be expensive even if she's clearly gone off her rocker.)

Secondly, if your estate is large, you could be losing a valuable tool for minimizing taxes. Putting at least some of your wealth into a bypass trust will allow the assets to grow, and eventually go to your heirs, without triggering a second round of estate taxes on your spouse's death.

Not leaving enough to a spouse. If you live in a common-law state -- and 41 states are, as well as the District of Columbia -- you can't disinherit a spouse. You typically must leave him or her one-quarter to one-half of your estate, depending on the state's laws. Even if you live in one of the community property states, your spouse may have certain rights to your estate. In California, for example, a surviving spouse can claim all community property, as well as a share of the dead spouse's separate property, if the will or other estate plan was made before marriage and not updated to include mention of him or her, according to attorney Denis Clifford, author of "Plan Your Estate."

Continued: Covering all the bases

 1 | 2 | next >