There are many common mistakes that people make when planning their estates, but these can be avoided if you prepare properly and know how to spot common mistakes before you make them.
Unintended consequences may even occur after you've completed your estate planning. This is because probate, trust, and tax laws change over time, so it is important to review your estate planning every few years.
In this blog, we will share 7 mistakes that are often made during the estate planning process to help you avoid unnecessary delays and expenses when planning your estate.
The biggest mistake you can make when planning your estate is simply failing to plan out how you're going to do it.
If you don't set aside some time and make a plan, you'll end up having too much to do later in a short amount of time or passing away without a will and your loved ones will have the burden of probating your estate without guidance from you.
So many people put off estate planning and deem it unnecessary, but failing to prioritize it means risking the financial future of your loved ones.
You have to ensure that your estate plan is completed before anything happens to you so your assets and property can be dealt with the way you want them to. As the COVID-19 pandemic has shown us, it is important not to wait due to the unpredictability of life.
If you haven't started your estate plan already, or it's been more than half a decade since you updated it, then take this time to sit down and get started or review your plan.
Note: if anything significant has happened in your life, like losing a loved one, you should update and review your estate plan.
Not discussing your estate with your family or friends can cause issues in the future. There are exceptions, of course, but it's generally a good idea to talk with your loved ones and set their current expectations now.
By talking with your family or friends, you'll be avoiding any disagreements after you've passed on.
If you don't want to or can't talk about specifics to the people named in your will or trust, you can write into your estate plan that if somebody contests anything, they will be written out and receive nothing.
Remember to set aside time to discuss your estate plan with your spouse and notify people who are named in your will or trust so that they're at least aware of it.
The most important thing you can do is to tell your family members where your will and trust documents are located. Never keep them in a safety-deposit box. Have them readily available at home. If you don’t want them to be easily accessed at home, at least inform your family members which trustee or attorney has them so that they can find them after you die.
Having a trust in your estate plan is the perfect way to ensure your assets get distributed to the correct people. But, you could end up causing a lot of issues for your family if you don't adequately fund your trust or title your accounts and assets.
Creating the trust is only half of the battle, and if you don't fund it, it's not going to help anybody, and you could end up hurting your family's future.
When establishing your trust, be sure to follow the steps to fund it correctly. Make sure you know exactly what you need to do and when you need to do it.
Keeping your trust organized and funded means:
Remember, you can always hire a professional to help you with anything you don't understand.
Estate planning isn't a set it and forget it kind of task. You have to continuously update it to ensure it reflects all the changes in your life.
Any major life event will affect your estate plan, so you'll have to update it every time something big occurs in your life.
These events can include:
Not only should you update your estate plan after every significant event in your life, but you should also review it every three to five years.
Even if nothing monumental has happened in your life recently, it's always a good idea to go through your estate plan to make sure everything you've written up is still what you want.
When planning your estate, it's vital to have more than one beneficiary designated for any of your assets. This is simply because if a beneficiary dies before you do, you'll have another one to pass down your assets to.
So, the second or contingent beneficiary is the next in line to your estate or particular assets.
You should technically have more than one contingent beneficiary listed, just in case more than one passes away before you.
For every asset, policy, or account you have, list a primary and at least two contingent beneficiaries.
The same applies to the trustee of your trust. You should name a successor trustee to take control in case the primary trustee dies before you do.
People often overlook the importance of having a power of attorney, but naming a power of attorney is vital in planning your estate. These are the people who will step in and make critical decisions for you if you end up incapacitated (such as in a nursing home or hospital).
If your living will does not designate someone as power of attorney, make sure you have created “Durable Power of Attorney” and “Health Care Proxy” documents to appoint a trusted person.
This may be the same person or different people, again keeping in mind to appoint successors too. These people will be in charge of all financial and/or medical decisions, so make sure they're somebody close and reliable.
Sometimes, even if your intentions are good, the way you word things in your estate plan can affect the lives of your children.
If your children are minors, then you might wish to include directions on how their guardians should spend assets, how they should take care of your children and how you'd like them to be raised.
But an important thing to note is that you might include something that you assume your child will want when it just causes problems for them.
For example, let's say you own a property and have three children. The idea might be that it's sold, and the money is split three ways between them. But what happens if two children want to keep the home when they’re older, but the other wants to sell? In cases like this, a legal battle might occur, which will cost a lot of money, and the asset will lose its value. Consider providing options for your beneficiaries and not being rigid with your plans.
It’s a good idea to highlight how you want the inheritance to be divided among the beneficiaries so conflict doesn’t occur.
Another idea to help secure your children's futures is to leave instructions on how you want inheritances passed to them through their guardians and conservators.
For example, they could get their inheritance when they reach a certain age. Another idea is they can get a portion of their inheritance at a certain age and the rest later.
Never create situations where they only receive their inheritance after certain events occur like graduating college or marriage. These are things that might not happen for your child, which would lead to them not getting their inheritance.
If starting your estate planning sounds stressful and confusing, then speaking with an estate planning professional is the way forward.
The team at Meimaris Law would be happy to help you through the complicated journey of planning your estate. With over 25 years of experience in estate planning, we can guide you through this process.
Get in touch today for a free consultation with our team and talk about how we can help you with your estate planning needs.