Having an estate plan can provide peace of mind, ensure your assets are passed on to the right people, your wishes are carried out and loved ones are protected after you die. However, failing to have a plan in place can lead to some costly mistakes and repercussions for beneficiaries.
Whether it’s an oversight or inadequate planning, a lack of estate planning can undermine your intent and drastically diminish the financial legacy you leave behind leading to additional stress and anxiety for beneficiaries. Here are some of the more common mistakes we come across when talking to people about their estate planning strategy…
Our own mortality is not something any of us like to think about. We can be a bit superstitious about that sort of thing and avoid “tempting fate” so we’d rather not go down that road unless or until we absolutely have to. Estate planning is not something you should wait to tick off the list when you retire, it’s about protecting your interests during your lifetime and the people you care about after you’re gone.
What happens if you become incapacitated who will make important financial, health and life decisions on your behalf if you are not able to do so yourself? The same goes for appointing a guardian for your minor children should something happen to you and your partner. What about your pets, what happens to them if you die? It’s always better to choose who will make decisions on your behalf or raise your children if something happens to you and/or your spouse, versus leaving it up to a court to decide.
Not making/updating your Will
A valid Will is essential especially if you have a family, partner or you have assets that you want to go to certain people, charities, etc. Without a valid will, the State decides who gets what and your estate will be distributed according to the rules of intestacy, which may not align with your wishes. It’s so important to have a will, regardless of how much you think you have, that clearly outlines your wishes for the distribution of your assets after your death. Regularly review and update your will to ensure it accurately reflects your current situation and wishes. Life circumstances change, such as marriages, divorces, births, deaths, and acquiring new assets and failing to revise your will to reflect these changes can lead to unintended consequences. Are your beneficiaries still capable of the job, do you need to appoint someone new?
Overlooking the importance of powers of attorney
Estate planning isn’t just about what happens after your death. It’s also crucial to plan for situations where you may become incapacitated. Designating power of attorney for healthcare and financial matters can ensure that your wishes are followed and that someone you trust will manage your affairs if you’re unable to do so otherwise, one will be appointed for you.
Neglecting to include digital assets and your digital footprint
In today’s digital age, it’s important to consider your digital assets, such as online accounts, social media profiles, cryptocurrencies, and intellectual property. Make provisions for these assets in your estate plan, including how they should be accessed, transferred or deleted. Don’t forget your digital footprint – what happens to your email account when you die – facebook, Twitter, Instagram, Linkedin – who will close these down. Access to photos, files that are on your cloud storage. Your phone contacts and access to other devices. Are your passwords stored in one place and who should have access to these…
Failing to plan for Inheritance Tax
Ireland has Inheritance tax laws (also known as capital acquisitions tax) that apply to certain transfers of assets and gifts. Failing to consider these tax implications can result in unnecessary taxes being paid by your estate or beneficiaries. Estate planning can help minimize the tax burden on your beneficiaries through various strategies, such as lifetime gifting, trusts, and tax reliefs available for certain assets or business interests. We have written extensively about inheritance tax in Ireland so check out the “News” on our website for more information on this topic.
Not considering the needs of your beneficiaries
Estate planning involves more than just distributing your assets. Consider the unique circumstances and needs of your beneficiaries, such as minors or individuals with special needs. Nominate a guardian(s) to care for your children in the event of anything happening to you both and include this in your Will. As your children get older and to account for changing circumstances you should review your nominee. Establishing trusts or appointing guardians can help ensure their financial and personal well-being.
Unmarried partners get nothing
Unmarried couples in Ireland do not enjoy the same inheritance rights as married couples. Even if provided for in their partner’s Will, the surviving partner will be treated as a stranger for capital acquisition tax (inheritance tax) purposes in relation to their inheritance. Where the surviving partner in a co-habiting relationship inherits the home, they may be liable for inheritance tax, unless they qualify for a dwellinghouse tax exemption, so long as there is no second property.
Currently cohabiting partners pays 33% tax on any inheritance over €16,250.00.
Failing to communicate your wishes
Talk to your family about your inheritance plans. Let them know who is receiving what. Make sure you set expectations. Otherwise, your family members may be battling it out in court. Let them know where your documentation is, who your key advisers are – solicitor, accountant, financial planner and what they need to do when the time comes.
Nobody likes to think about what happens after they die but the reality is it’s going to happen to us all. If you want to preserve your legacy for the next generation, you need a plan.