10 Estate Planning Mistakes to Avoid

Estate Planning Mistake #2: Failing to Update Your Plan After a Child Is Born — Heath Ledger

A new child should trigger a new look at your entire estate plan.

The Heath Ledger estate planning story shows that having an estate plan is not enough.

You also need to update it when your life changes.

Ledger signed a will in 2003. At the time, he had no children.

Two years later, his daughter, Matilda, was born.

Ledger died unexpectedly in 2008 at age 28. His 2003 will was still in place.

It did not provide for Matilda.

Heath Ledger’s Will Predated His Daughter

Ledger’s will left his estate to members of his existing family.

His parents received a share. His sisters received the balance.

That plan may have made perfect sense in 2003.

But Ledger’s life changed dramatically afterward.

He became a father.

Yet his will apparently did not change with him.

After Ledger’s death, his father publicly said that Matilda would be provided for. Several months later, the family announced that Ledger’s estate would pass to her.

That produced a good result for Matilda.

But family cooperation should not be the mechanism that determines whether your child receives an inheritance.

An After-Born Child Can Create Legal Questions

Most states have laws designed to protect certain children who are born or adopted after a parent signs a will.

These laws recognize a common problem.

A parent may sign a will while childless. A child arrives years later. The parent never updates the will.

The law may assume that the parent simply forgot to revise the document rather than intentionally disinherited the new child.

But the result depends on the governing law and the facts.

Ledger’s situation was particularly complicated because he was Australian, died in New York, had lived in the United States, and owned property in more than one place.

His daughter potentially had legal rights even though the will did not name her.

The family ultimately avoided litigating those questions by directing the estate to Matilda.

Other families may not agree so easily.

New Jersey Protects Certain After-Born Children

New Jersey has its own omitted-child statute.

Under N.J.S.A. 3B:5-16, if a person had no children when a will was signed and later has or adopts a child, the omitted child may receive the share that child would have received if the parent had died without a will.

There are important exceptions.

For example, the rule may not apply if the will shows that the omission was intentional.

It may also not apply when the parent provided for the child outside the will and the circumstances show that the outside transfer was intended to replace a gift under the will.

The statute is useful.

But it is a safety net.

It is not a substitute for updating the estate plan.

Having a Child Changes More Than Your Beneficiaries

Adding a child’s name to a will is only part of the job.

Becoming a parent should trigger a broader estate planning review.

Who should raise the child if both parents die?

Who should manage the child’s inheritance?

At what age should the child receive control of the money?

Should assets remain in trust beyond age 18?

Is there enough life insurance?

Are the beneficiary designations on retirement accounts and insurance policies correct?

Does the existing trust include the new child?

Who should serve as trustee?

Those questions can matter much more than simply adding a child’s name to a document.

Don’t Rely on Your Family to Fix the Plan

Ledger’s story ultimately had an unusual ending.

His parents and sisters were the beneficiaries named in his will. Yet public reports indicate that the family chose to give the estate to Matilda.

That may have produced exactly the result Ledger would have wanted.

But imagine a different family.

A parent dies with an old will naming siblings as beneficiaries. A young child was born afterward.

One sibling believes the parent intended everything to go to the child.

Another says the will should control.

A third argues that the parent deliberately chose not to update the documents.

Now the family needs lawyers and possibly a court to determine what happens.

There is a much easier solution.

Update the plan.

The Heath Ledger Estate Planning Lesson

Heath Ledger deserves some credit.

He signed a will when he was still in his twenties. Many people that age have no estate planning documents at all.

The mistake was leaving that plan unchanged after one of the biggest events in his life.

He became a parent.

A birth or adoption should trigger an estate planning review.

So should marriage, divorce, death, disability, a major change in wealth, or another significant change in the family.

The documents do not know that your life changed.

You have to change them.

Do not leave your child’s inheritance dependent on a statute, a court, or the goodwill of other beneficiaries. When your family changes, update your estate plan.

This article discusses publicly reported information concerning Heath Ledger and his estate for educational purposes. Ledger’s estate involved multiple jurisdictions, and this article does not attempt to determine what rights any beneficiary would have had if the estate had been contested.

How long has it been since you reviewed your estate plan with an attorney?