The most general estate planning mistakes are easily avoided if you know what to look for. Use the following to guarantee you’re well protected.
Whereas creating your Estate Plan is important, creating one that avoids general mistakes and problems is vital. Essentially, you don’t want to take the time it takes to devise a plan to safeguard your loved ones, just to have it peppered with errors causing them stress and strain at the end.
Making sure you have knowledge of general Estate Planning mistakes means you are going to be more likely to not make them. So if you are devising your first plan ever, or you’re bringing up to date one already in place, get familiar with what can hinder you, so you can write an ideal plan that achieves precisely what you visualize at the same time you’re protect your legacy.
The Thirteen Most General Estate Planning Mistakes
Since it can be easy to forget specific things when devising an Estate Plan, the below guide is going to help you. It brings to light the most common Estate Planning mistakes there are, including:
- Not planning at all
- Not speaking with family and friends
- Appointing only one Beneficiary
- Fail to remember about Power of Attorney or Healthcare Representatives
- Fail to remember about final arrangements
- Fail to remember about your digital assets
- Fail to remember about charities that are important to you
- Mindless of your children’s futures
- Getting too particular
- Improperly funding your trust
- Failing to remember about taxes
- Not safeguarding your Estate Plan
- Bringing your plan up to date too rarely
Not Planning at All
The greatest mistake you can possibly make concerning your Estate Plan is obviously not taking the time to do it. Regrettably, it’s something too many people put off doing – but failing to give priority to your Estate Plan, or not guaranteeing it’s complete, at the end of the day means you are putting at risk the financial future of your estate, your legacy and above all, your loved ones.
How to Fix It: If you haven’t already begun your Estate Plan (or if it’s been five years plus since you’ve updated it, or if you’ve recently had a significant life event), take time to sit down and either start or go over your plan.
Not Speaking with Family and Friends
Obviously, there are exceptions to this rule, but, when possible, it’s usually wise to have even a small discussion with your friends and family. Setting anticipations now, in which there is a chance for discussion when needed, could lessen the probability that there is any dispute or disagreement following your passing away. When this is not an option, there is terminology you are able to write into portions of your Estate Plan that specify anyone that challenges anything may be written out.
How to Fix It: Put time aside in advance to talk about your Estate Plan with your spouse or anyone you’ve appointed Executor or Trustee and consider notifying specific individuals you name in your Will and/or Trust.
Appointing Only One Beneficiary
You need to have more than one beneficiary appointed for any of your assets. Should a beneficiary pass away prior to you, you are going to want to have what’s referred to as a provisional beneficiary. This individual is going to be replacement to your estate or any certain asset. Preferably, you should have more than one provisional beneficiary appointed.
How to Fix It: With each asset, account and/or policy, make sure to appoint a primary and one or more provisional beneficiaries.
Failing to Remember About Power of Attorney or Healthcare Representatives
Appointing a Power of Attorney – medical or financial – and/or a Healthcare Representative is critical, as these are the individuals that would step in to make decisions should you become debilitated. Remember that in a lot of cases, these roles disperse upon your passing.
How to Fix It: When your Living Will doesn’t appoint a Power of Attorney or a Healthcare Proxy, be sure you have separate documents that appoint a trusted individual(s) to make vital financial and medical decisions on your behalf.
Failing to Remember About Final Arrangements
Your loved ones are going to be grieving following your passing away but planning ahead of time what you would wish to have happen (concerning your funeral and/or burial arrangements) can be a blessing for those you’re leaving behind. One other important element to this is making sure your wants for end-of-life care are acknowledged (such as hospice, assisted living, etc.).
How to Fix It: Consider how you would want your life observed and what kind of funeral, observance or burial you wish for. Put it in writing so your loved ones know precisely what they are able to do to honor you. Furthermore, end-of-life planning documentation can be included in your Estate Plan also. All of this both guarantees your last wishes are going to be recognized while reliving some strain for the people grieving your loss or not knowing what you would want.
Failing to Remember About Your Digital Assets
The premise of Digital Estate Planning is somewhat new, given the technological advances in today’s world. Make sure to include a Digital Estate Plan that provides how you are going to want all your digital assets to be managed following your passing away. This might be anything like social media accounts, banking online, and e-mail accounts, etc.
How to Fix It: Part of your Estate Planning needs to definitely include a Digital Estate Plan. Just as you would do with other parts of your plan, you are going to want to appoint a Digital Executor that can guarantee all your digital assets are managed properly.
Failing to Remember About Charities that are Important to You
Specifically, if you have a big estate, but even if you’re not incredibly wealthy, you are still able to distribute some of your assets for the benefit of a charity that is important to you.
How to Fix It: There are several ways you are able to leave portions of your estate to charities. Including the gift you are going to want to grant in your Estate Plan is one method to make sure your wishes are honored. Or, you can appoint a charity as a beneficiary of an asset – such as the revenue from investments or life insurance policy.
Mindless of Your Children’s Futures
Whereas your directions may be well-intentioned, there are cases in which how you are wording things might come back to plague your children or heirs. When your children are very young, you might want to include guidelines on how their guardian(s) needs to spend assets, either for the caring of them, or for benefiting them in other ways.
Other mistakes might include presuming your children are going to want something, when in reality, they might not. For instance, it is your intention to pass down a 2nd home that’s been in your family for decades, with the condition that it can only be sold when every child is married with their own 2nd home. But what is going to happen when one of the children does not want to get married? Or does not want to own a home? In these cases, significant legal fees and depreciation of an asset might impact the entire size of your estate as heirs go through the courts for gaining allowances.
How to Fix It: It’s always wise to leave specific instructions on how you are going to want inheritances transferred to minors. Does it need to be based on age? Marital standing? College graduate? And obviously, think very carefully concerning how you word any conditions on an inheritance.
Getting Too Specific
It’s a good idea that you to be as specific as you can when devising your Estate Plan. Nevertheless, there is one provision to that. You might own assets at some point in life that you possibly not have in your future. Are you placing stocks into your plan? Property? Baseball season tickets? Are these the things you are guaranteed to have in your future?
How to Fix It: For avoiding difficulties from being too specific just comes from Estate Plan management best practices. Go over (and update when required) your Estate Plan at least every 3 to 5 years, or anytime you have a significant life event. When you sell property that was in your initial Estate Plan document, make sure you modify it as soon as you can.
Improperly Funding Your Trust
A Trust is an ideal component to have in just about any Estate Plan – but it could all be for nothing if it is not properly funded. Creating a Trust is only just the beginning; it’s worthless unless it’s actually funded.
How to Fix It: Adhere to all the steps of funding your Trust and make sure you know exactly what you are required to do. Including everything from the way to title your assets, to the way to acquire your taxpayer identification number (TIN), to the way of handling your personal belongings and assets that are without titles as opposed those that do, and a lot more.
Failing to Remember About Taxes
Estate tax liability could put a huge reduction in what you plan on leaving behind for your beneficiaries. As well as your estate owing taxes prior to beneficiaries being paid out, you also want to consider about how your gifts are going to affect individual heirs, too.
How to Fix It: Usually, estate tax liability is not going to be a huge issue. Unless you have a larger estate ($11.58m each person or $22.36m each couple), your estate is not going to be taxed at a federal level. Don’t forget, in not many years, unless an extension is carried out, the law is going to revert back to the previous $5 million exemption restriction. In addition, you should find out if the state you and your beneficiaries live in comes with a state estate tax, and comprehend what the limits are prior to you writing your Will or Trust.
Not Securing Your Estate Plan
Having the greatest Estate Plan there is, is not going to accomplish anything when your heirs can’t locate it. Shy away from placing your plan in a safety deposit box – it can become difficult when your loved ones try to access it following your passing away. However, you do want to keep all of your Estate Planning paperwork together and in a safe place.
How to Fix It: Placing your Estate Plans in a fire-proof safe is a brilliant idea. Don’t forget to give notice to your spouse or other trusted family members or friend know where it is located.
Updating Your Plan Too Infrequently
Regrettably, Estate Planning is not a set-it-forget-it document. You should to keep it up to date, and be sure it is a reflection of all your life changes as they rise. As mentioned above, any significant life event could be the reason for an update – this might include getting married, getting divorced, the birth of a child or passing away of a member of your family or beneficiary.
How to Fix It: Along with updating your Estate Plans following any significant life event, don’t forget how important it is to do a overall review around 3 to five 5 (even when no significant life events has happened).
Devising an Estate Plan is one of the most unselfish things you are able to do for family and loved ones. However, do not let your good intentions slip to the wayside because you’ve make any of these inadvertent Estate Planning mistakes.
Writer, S. (2022, February 1). 13 Estate Planning Mistakes & How to avoid them. Trust & Will. Retrieved March 11, 2022, from https://trustandwill.com/learn/estate-planning-mistakes
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