5 Common Online Estate Planning Mistakes to Avoid

Completing your estate planning can be a daunting task. Online estate planning tools have made this process more accessible by offering convenience and affordability. However, these tools also come with potential pitfalls. Mistakes in online estate planning can lead to legal disputes, financial loss, and emotional distress for your loved ones. In this article, we will discuss five common online estate planning mistakes. If you're looking to create your estate plan via online vendors, this article will outline a few concerns you should be aware of.

Introduction to Online Estate Planning

Online estate planning is a modern approach to a traditional process. It involves using digital platforms to create legal documents such as Wills, Trusts, and Power of Attorney forms. These platforms may offer what seems to be step-by-step guidance, making the process appear less daunting. However, it's essential to use them wisely to avoid common mistakes that could undermine your estate plan. Estate planning is a key task that ensures your assets are distributed according to your wishes after your eventual death. A proper plan can also provide directives for your care should you become incapacitated. However, mistakes in estate planning can lead to legal disputes, financial losses, and emotional distress for your loved ones. Therefore, it's vital to avoid these common pitfalls, especially when using online tools for estate planning.

Mistake 1: Neglecting State-Specific Legal Requirements

Mistake #1

One common mistake in online estate planning is neglecting state-specific legal requirements. Each state has its own laws governing estate planning that can significantly impact the validity and effectiveness of your estate planning documents. Ignoring these laws can lead to unintended consequences. For instance, your Last Will and Testament may be deemed invalid, or, your Power of Attorney may not be recognized when it's most needed.

Understanding Your State's Laws

It's crucial to understand your state's laws before drafting your estate planning documents. These laws cover various aspects, including the requirements for a valid will, the powers and limitations of a Power of Attorney, and the rules for establishing an Irrevocable Trust. Each state may have a different hierarchy of who the State determines is the ‘next of kin' should you pass away without clear designations. Reach out to one of our trusted Washington estate planning attorneys to receive the peace of mind that your plan is catered to the legal requirements.

Without this understanding, you may end up with an estate plan that doesn't reflect your wishes. Worse, it may lead to legal disputes among your heirs, causing emotional and financial strain that could take years to unravel.

The Pitfalls of Generic Templates

Many online estate planning tools offer generic templates. While these templates can be a good starting point, they may not cater to your state's specific requirements or your unique needs. Relying solely on these templates can result in an incomplete or invalid estate plan. Therefore, it's advisable to use these templates as a general guide, then work with an estate planning attorney to tailor them to your situation and state laws. A proper estate planning attorney will provide you with the legal guidance you need to receive peace of mind your documents are being executed correctly.

Mistake 2: Failing to Regularly Update Documents

Mistake #2

Another common mistake is failing to regularly update estate planning documents. Life is full of changes. These changes can significantly impact your estate plan. Marriage, divorce, the death of a loved one, the birth of children, or the acquisition of significant assets are all life events that should trigger an update. Failing to do so can lead to unintended consequences, such as assets going to the wrong beneficiaries or taxes reducing the value of those assets. If you've had changes happen recently, it can be difficult to determine the best method, or tool, needed to update your estate plan effectively online. By reaching out to an estate planning attorney, you can receive the needed guidance to help you achieve your new goals.

Life Changes and Your Estate Plan

Your estate plan should evolve with your life. For instance, if you get married, you may want to include your spouse in your will. If you have, or adopt, a child, you may want to set up a trust for their future, or designate a guardian, in the event of your untimely passing. Ignoring these life changes can result in an estate plan that no longer reflects your wishes. It's therefore crucial to review and update your estate planning documents regularly.

The Consequences of Outdated Beneficiary Information

Outdated beneficiary information can lead to serious issues. For example, if you've divorced but your ex-spouse is still listed as your beneficiary, they may inherit your assets. If you have remarried, it is possible that an outdated estate plan would still be written to bequeath your estate to your previous partner and/or their family. Similarly, if a beneficiary predeceases you and you don't update your documents, their share may not be distributed as you intended. Regularly updating your beneficiary information can help avoid these issues and ensure your loved ones receive exactly what you want them to, when you want them to.

Mistake 3: Overlooking Digital Assets and Privacy Concerns

Mistake #3

In today's digital age, overlooking digital assets is a common mistake (ironic, for creating an estate plan on a digital medium!). Digital assets include everything from social media accounts (YouTube, Twitter, Instagram, etc) and Non-Fungible Tokens (NFTs), to digital currencies like Bitcoin or Ethereum. These assets can hold both financial and sentimental value. However, many people fail to include these assets in their estate plan. This can lead to these assets being lost or inaccessible after your death. There is often no way for any entity to receive these assets if their password is lost. Unlike buried treasure, an encrypted password is truly impossible to stumble upon! Ensure to include any digital assets in your estate plan to avoid them being lost forever.

Including Digital Assets in Your Estate Plan

You should provide a list of your digital assets, along with access information, somewhere alongside your estate planning legal documents. This can help your personal representative distribute these assets after your death. Remember, digital assets aren't just financial. Modern digital assets could be as simple as a Google account, but having access provides avenues to retrieve every email, photo, or linked account that the decedent held. These assets can hold significant sentimental value for your loved ones.

Ensuring Privacy and Security Online

Privacy and security are also important considerations in online estate planning. You should ensure that your estate planning documents are stored securely. This can help protect your personal information from being accessed by unauthorized individuals. Additionally, be cautious when using online estate planning services. Make sure to use a reputable service that prioritizes user privacy and data security. Estate planning involves some of the most intimate details of your life, you want confidence that your information is being secured safely.

Mistake 4: Inadequate Planning for Incapacity

Mistake #4

Incapacity planning is a vital component of a comprehensive estate plan, addressing the important decisions about who will manage your personal and financial affairs should you become unable to do so. Regrettably, this crucial aspect of estate planning is often neglected. Often, couples will assume that their partner will be around to make decisions for them. Remember, you and your partner could be critically injured at the same time. You need to be prepared with contingency choices so you know your medical or financial wishes will be looked after by someone you trust.

The Role of Power of Attorney and Health Care Directives

A Power of Attorney document allows you to appoint someone to manage your financial or medical affairs. This person can make decisions on your behalf if you become incapacitated.

A Health Care Directive, on the other hand, specifically outlines your wishes for medical treatment. It also appoints someone to make medical decisions for you if you can't. A Health Care Directive has ultimate authority over your medical care. With this document, you direct all medical professionals, and your medical power of attorney, as to what methods of care you wish to, or not, receive.

The Risks of Not Having a Contingency Plan

Without a contingency plan, your loved ones may face legal hurdles. They may struggle to manage your affairs or make medical decisions on your behalf. This can cause unnecessary stress and conflict during an already difficult time. Take the emotional weight off your loved one's shoulders by putting your wishes in a legally binding document.

Mistake 5: DIY Planning Without Professional Advice

Mistake #5

Online estate planning tools can be a great starting point. They can help you understand the basics and get your documents in order. However, they are not without limitations. Relying solely on these tools can lead to oversights. You may miss out on important legal nuances or fail to fully understand the implications of your decisions. Online tools often provide generic templates. These may not cater to your unique situation or meet your state's specific legal requirements. Moreover, these tools cannot provide personalized advice. They can't help you navigate complex situations or provide solutions tailored to your needs.

When to Seek Legal Advice

If your estate involves complex assets or unique family situations, seek professional advice. An experienced estate planning attorney can provide valuable insights. They can help you understand the implications of your decisions. They also ensure your documents are legally sound and meet your specific needs. Even if you think that the estate looks simple, working with an attorney will ensure that your specific needs and desires are included in your plan.

Ensuring a Sound Estate Plan

Estate planning is a task that requires careful attention and understanding. It's not just about distributing assets, but also about ensuring your wishes are respected and your loved ones are taken care of. Avoid common online estate planning mistakes. Understand your state's laws, update your documents regularly, include digital assets, plan for incapacity, and seek professional advice. Start your estate planning journey today. Be thorough, be informed, and don't hesitate to seek professional help. Your family's future legacy depends on the decisions you make now.