3 Big Mistakes in Creating a Will

The mistake that we see over and over again is that client’s Wills are not plans, but a mish-mash of forms. Anyone can create a form, and these days you can do it with a press of a button.

It requires effort, precision and creativity to create a plan.

To give you an idea of this, here are the 3 big mistakes when creating a will we see over and over again:

1. Naming the Estate as a Beneficiary.

   Properly designating beneficiaries on life insurance policies and retirement accounts is critical for a Will to be effective. Often times, naming your estate on beneficiary designations will result in unintended tax consequences. Many retirement accounts are tax deferred. You haven’t paid taxes on this money, but your children or your beneficiaries will. The IRS is anxious to get their money, and naming your estate or even a trust improperly will result in your beneficiaries paying a lot more income tax than is needed. (Check out the IRS website.)

2. Failing to Coordinate with a Children’s Trust

   A Will often times create a Children’s Trust so that the monies are managed for young children. We find that clients often times fail to name their Children’s Trusts as beneficiaries on life insurance and retirement accounts. This is even more important in light of the recent, U.S. Supreme Court case. (See our earlier blog entry) The beneficiary designations are contracts that bind the financial institutions. If you name your children as beneficiaries and not their Trusts, then they will receive a check in their names from the financial institution. Then, this is their money, and they can go “hog wild” with the money.

3. Using Computer Generated Forms

   We see this more and more now – computer generated forms. For example, just recently, a client came in with a computer generated form off the internet. The client made a mistake when following the prompts, and created a Will that was effective, but designed in such a way that probate is going to cost double the amount.

   The client could only blame herself. She took the risk. She admitted, “I guess I didn’t save a lot of money for my friend.”

   You get what you pay for. Computer generated forms are good if you know how to use them, and if you are willing to accept the responsibility of using them. Remember, this is why many of the computer generated forms are cheap. You are assuming the risk of using their forms.

Again, all too often, clients focus on the documents, and think that if they have a form, they have a plan. This is a mistake. You want to put in the time and effort to create a plan that actually works. Contact our Hoffman Estates Estate Planning firm, and we will help you create a plan that works.