Common estate-planning mistakes
Avoid these common mistakes when planning an estate.
Although every estate plan is unique, most estate planning blunders are not. Regardless of the details of your personal situation or your estate goals, it's worth your time to review these six common estate planning pitfalls and learn how to avoid them.
1) Not having an estate plan
Neglecting to establish an estate plan is the most serious mistake you can make. If you die without a will or estate plan, your assets will be distributed by your state's court system in accordance with your state's intestacy statutes. The benefit of having an estate plan is that your assets are distributed according to your wishes.
2) Keeping your estate plan a secret
Many people don't discuss their estate plan with those who are involved in important decision making and are impacted by the distribution of assets such as named beneficiaries, executors and someone with power of attorney. The benefit of keeping everyone informed is that it will help minimize confusion and provide clear direction on how you want your assets handled.
3) Going it alone
Creating a comprehensive estate plan is complex and can be overwhelming for someone who isn't familiar with all of the legal and tax aspects involved in the process. The benefits of consulting with a professional are that they offer guidance to help you avoid mistakes and create a comprehensive plan that addresses all of your needs.
4) Not keeping your estate plan updated
Failing to update your estate plan could lead to unintended consequences such as your assets not being distributed according to your wishes. It's important to keep in mind that over time things will change. Keeping your estate plan updated, especially during important life events, will ensure that your estate plan is current so your assets are distributed as intended.
5) Failing to change beneficiary information
If the beneficiaries on your life insurance policy, investment accounts and retirement accounts are not reviewed regularly and kept up to date, the proceeds could go to someone that you did not intend, such as your ex-spouse. The benefit of keeping your beneficiaries up to date is that these account designations typically take precedence over whatever you may have written in your will.
6) Forgetting to include health care in your estate plan
If you don't include health care as a part of your estate plan, important medical decisions will be made for you if you can't make them for yourself. An advance health care directive, also known as a living will, covers these matters. The benefit of having a living will is that it provides guidance to your doctors and health care workers to make important medical decisions related to your care if you're unable to make them for yourself. It also takes the burden off of loved ones making these decisions for you.
Estate plans are complex, and while some mistakes may turn out to be minor, others can have major consequences. Avoid them by getting help from a professional to make sure your plan accurately reflects your wishes.