Money Matters with Nimi: Death Is Unavoidable But You Can Avoid These Estate Planning Mistakes

The news of Kobe Bryant’s tragic death in a horrific helicopter crash in January along with his 13-year old daughter and seven other people, sent shock waves across the world; his celebrity transcended basketball. With his passing, Kobe Bryant left behind his wife Vanessa and three young children; one of them, a little baby girl of just nine months.

Sadly, it takes a shock like this to bring to the fore the pressing need, to prepare carefully for the welfare of our families after our lifetime. Kobe Bryant’s estate plan has not yet been revealed, but I would like to think that his family will be well taken care of, and without controversy or acrimony.

One would assume that someone so accomplished, with considerable wealth, and who most likely had access to a team of financial, legal and tax advisors, would have formalized his wishes for his personal fortune and his business empire. The laws of intestacy (if he died intestate – that is, without a will) leave the courts to determine the distribution of his estate. Under Californian Law, which experts say will be applicable to his estate, assets will be distributed to the decedents spouse and children.

Sometimes it takes a shock like this to remind us of the pressing need to prepare carefully for the welfare of our families long after death. Estate plans are not just for the rich and famous, but their celebrity does highlight powerful estate planning lessons that can apply to each one of us.

Do you have an estate plan? The vast majority of Nigerians do not. There is a reluctance to discuss this certainty, with a fear of death causing many to procrastinate over an essential part of a financial plan.

Here are some estate-planning mistakes to avoid:

Not having an estate plan

There are several estate planning tools so it is inexcusable to do nothing. You have loved ones, people you care about. Why would you put them through so much stress in addition to the grief of losing you; it leaves them in a shroud of uncertainty and confusion. Without specific instructions from the deceased, an estate may be subject to long drawn-out court battles as family members fight over the spoils. With our native law and customs and an extensive extended family, estate planning is more important than ever.

A will is the simplest estate-planning tool. It is simply a letter of instruction, appointing someone to be in charge of your estate and specifying how you want your estate to be distributed or divided.

Don’t die intestate

If you die intestate, that is, without a will, the expensive probate process kicks in; your estate will be distributed according to the laws of intestacy. This process can be fraught with long drawn-out delays. This could be devastating to your spouse and children with bills to pay.

Procrastination

There is a fear of dwelling on our mortality that makes people postpone this important task. If you are young and single, and have no dependents, it might seem absurd to even consider the prospect of dying. The truth is that many young singles are building extraordinary businesses that do need a succession and an estate plan. Anyone with significant assets, and a family to protect,  children or a spouse, should at least have a will even as early as in their 30s.

Not planning for minors and young adults

It is important to select a guardian for your minor children otherwise the courts will also decide who will raise them; this may not be the person that you would have preferred.

Do you want your children to inherit money early? Young adults may get unfettered access and control of their inheritance from the “tender” age of 18. Most 18-year olds are not equipped to make the right financial decisions particularly for large sums of money. In addition, inheriting too early has its challenges and makes it difficult for some children to be independent, motivated or driven to success.

A trust is an outstanding estate planning tool; managed by a reputable trustee company, it enables the seamless transfer of wealth to loved ones, controlling the long-term distribution of your assets. With all wishes clearly spelt out, beneficiaries inherit directly and expenses are minimised. An important advantage is that designations of your assets are private. By relying primarily on a will, bequests are public as wills are filed with the courts as a public record.

Leaving untidy records

Where are your bank statements, brokerage statements, insurance policies, title documents, etc? You can imagine a family in grief having to go through the stress of trying to find a will or other evidence of estate planning. A will is only useful if someone knows where it is. If it cannot be found, the courts might assume that there is no will and then the long probate process will begin. Keep your documents organised and secure; many families have lost property and other assets as their loved one never disclosed it and there was no documentation to prove ownership.

Failure to update an estate plan

As life evolves, estate planning documents and beneficiaries should be updated as your financial and personal situation changes. Failing to periodically update an estate plan or make changes to beneficiaries after a marriage, birth, divorce, remarriage, death or other life changes can cause problems; this could include disinheriting heirs. Buying and selling property or a business require an update of your plan.

A successful young man forgot to change the designation on his insurance policies; he had put his father as sole beneficiary. His wife and three children inherited nothing. Beneficiary designations on retirement accounts or insurance policies should be reviewed to be sure they are actually in accordance with your wishes.

Not putting your wishes in writing

You might wish to make some special bequests to “trusted” servants, friends or members of the extended family that might not otherwise be considered. It is important to put all bequests in writing if you want them to happen. Alleged promises that only come to the fore after your demise can lead to a lawsuit being filed against an estate and unnecessary acrimony.

Not planning for estate taxes

Poor estate planning will force your heirs to have to sell valuable property or precious items because they just don’t have the available liquidity to pay those statutory taxes. With careful estate planning during your life time, acquiring assets in the most appropriate vehicles, taxes can be minimised whilst ensuring that legal obligations are met.

Failing to be clear about keepsakes and heirlooms

Individuals often fail to be specific about personal property in their estate planning, which can lead to fights over precious family heirlooms, artwork, jewellery, a grand piano and other items of sentimental value, from a tablecloth to a rug or tea set! Who should get what? Don’t assume that your lovely children will just share all your personal effects equally without a squabble. Be as specific as you can, particularly for keepsakes.

Not leaving instructions for your funeral

What sort of funeral would you like? If you wish to be buried like royalty, do set aside funds specifically designated for that purpose so that you can have the “befitting funeral” that you deserve. Your descendants have enough to deal with emotionally and financially without having to go into debt over outrageous funeral expenses.

Intestacy often leads to ugly public rancour. Do the right thing. Tidy up your affairs. Death is a certainty for one hundred percent of us. Don’t leave your life’s work to chance. Plan instead to leave a lasting legacy and not a family feud.