The Most Common Estate Planning Mistakes
Estate planning is a process that helps you manage your assets while alive and transfer them after your death. While it may seem like a daunting task, failing to plan for the inevitable is one of the biggest mistakes you can make. Don’t wait until it’s too late to start thinking about what will happen to your belongings and your loved ones when you’re gone. Here are some of the most common estate planning mistakes people make. This knowledge should allow you to avoid these mistakes and make the best plan for the future.
Failing to Plan
One of the most common estate planning mistakes is failing to plan at all. If you don’t have a will or any other kind of estate plan in place, it can create a lot of unnecessary stress and complications for your loved ones after you’re gone. Not to mention, if you have young children, it’s especially important to have a plan in place in case something happens to you. Without a will or estate plan, state laws will determine how your assets are distributed, which may not be in line with your wishes.
Not Discussing with Family and Friends
Another common mistake people make is not discussing their plans with their family and friends. It’s important to have these conversations while you’re still alive so that everyone is on the same page and knows what to expect. Keep in mind that your family and friends will likely be grieving after you die, so it’s important to make things as easy for them as possible by having these conversations beforehand.
Not Thinking about Your Children
If you have young children, it’s important to think about their future in your estate planning. This includes things like who will take care of them if something happens to you and who will make financial decisions on their behalf. Failing to plan for these contingencies could mean that your children are placed in the care of someone you wouldn’t choose or that they don’t have anyone looking out for their best interests.
Naming Only One Beneficiary
Many people make the mistake of naming just one beneficiary, such as a spouse or child, without considering what would happen if that person died before they did. It’s important to name alternate beneficiaries in your will or estate plan so that your assets are distributed according to your wishes regardless of whether the original beneficiary is still alive when you die.
Failing to Choose Power of Attorney or Healthcare Representatives
If you become incapacitated, it’s important to have someone named as your power of attorney or healthcare representative so that they can make decisions on your behalf. This person will need to be someone you trust implicitly and who knows your wishes regarding medical treatment and other important matters.
Overlooking Final Arrangements
Another common mistake people make is forgetting to discuss their final arrangements with their loved ones ahead of time. This includes things like whether you want to be buried or cremated, as well as any specific funeral or memorial service preferences you may have. By having these conversations now, you can spare your loved ones the stress of having to make these decisions on their own after you die.
Forgetting to Consider Your Digital Assets
Your “digital assets” are anything that exists in digital form, such as social media accounts, online banking information, and loyalty points. It’s important to include these assets in your estate plan so that your loved ones can access them after you’re gone. Without explicit instructions, your family may not be able to get into your accounts or may not even know that they exist.
Being Too Specific
It’s important to be specific when drafting your estate plan so that there is no room for interpretation. However, there is such a thing as being too specific. For example, if you stipulate that a piece of property can only be used for a certain purpose, it may become a burden for your heirs if they have different plans for it. It’s important to strike a balance between being specific and leaving some flexibility in your estate plan.
Forgetting About Taxes
When you’re creating an estate plan, it’s important to keep taxes in mind. Depending on the value of your assets and how they’re distributed, your loved ones could be hit with a hefty tax bill after you die. By working with an experienced estate planner, you can ensure that your assets are distributed in a way that minimizes the tax burden on your heirs.
Failing to Update Your Plan Frequently Enough
Your life circumstances are always changing, and your estate plan should change with them. If you got married, had children, or bought a house since you last updated your estate plan, those are all major life events that need to be reflected in your documents. You should review your estate plan at least once every five years, or sooner if there’s a significant change in your life.
Not Securing Your Estate Plan
An estate plan is only as good as its execution. Once you have everything in place, it’s important to make sure that the people who are supposed to be carrying out your wishes know where to find all the relevant documents. Store them in a safe place where they can easily be accessed by the executor of your estate, and provide written instructions for what needs to be done with them after you’re gone.
Estate planning can seem like a daunting task, but it doesn’t have to be. With a little bit of planning and some expert guidance, you can create an estate plan that meets your unique needs and provides peace of mind for you and your loved ones. If you need help with estate planning, don’t hesitate to contact us today to schedule a free consultation.