|You can accidentally disinherit your heirs
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"The possibility of trying to manage multiple accounts and keeping track of where everything is and who the beneficiaries are can be very difficult," says Jean Setzfand, director of financial security for AARP. "It definitely can be a problem."
The proliferation of pay-on-death bank account options, beneficiary designations on IRAs and 401(k) retirement accounts, survivorship options on home mortgages and deeds, and other instruments that pass assets directly to beneficiaries can create an inheritance jigsaw puzzle where a few pieces may go missing.
A related risk: making sure that elderly parents don't accidentally let their life insurance policies lapse and thereby inadvertently disinheriting their loved ones.
Where do wills typically take a wrong turn?
1. Failure to update a will
Life events are often a reason to celebrate or grieve. They're also a good reason to update your will.
Joanna Grossman, a law professor at Hofstra University who has been tracking Anna Nicole's ongoing legal battles, says a few simple changes to Anna Nicole's will could have meant millions to young Dannielynn had Anna Nicole predeceased Daniel.
"If she had written the will in the first place to say, 'I leave everything to my children, if any,' none of this would have happened," she says. "There are lots of different missteps, but certainly not updating the will after a marriage, a divorce or the birth of a child are key ones. Many estates come undone because of a significant change in family status after the will is made."
Solution: Always update your will after life's "big three": marriage, divorce or birth of a child.
2. Disinheritance by faulty will
A first step in a probate proceeding is to determine the validity of the will. If you failed to sign or had someone else sign your will for you, it could be found invalid. Similarly, if you failed to take the proper steps to void a previous will, it could be ruled as valid, again against your intentions. In either case, unintended consequences could surely follow.