Estate planning is best conducted with the assistance of an attorney, who can help you avoid pitfalls. Still, it is important to know what some of the most common estate planning mistakes are—that way, you can avoid them. Below is a list of ten commonly-seen estate planning errors.
1. Not Planning
To kick off this list, we’ll talk about one of the worst mistakes you can make: failing to create an estate plan at all. An estate plan offers protection for you after you die and while you are alive. Not only does it provide you with asset transfer after death, there are other important documents, such as a power of attorney and healthcare directive, that can be extremely valuable in an emergency.
2. Naming Only One Beneficiary
You always need more than one beneficiary for an asset. This is to safeguard the asset, as what happens if the beneficiary dies before you do? For each policy, account, and asset, you should have a contingent beneficiary that is next in line. Even more ideally, consider listing more one contingent beneficiary.
3. Forgetting Final Arrangements
Advance-planning what you want to happen for your burial arrangements and funeral is a blessing for people you leave behind. Make sure your wishes for end-of-life care, such as assisted living, hospice, and more are known beforehand as well. It will make things much easier for you relatives.
4. Not Including POAs
Powers of attorney are necessary protective tools in your estate plan. Commonly, they are seen for finance and healthcare. If you are too incapacitated to make your own financial and/or healthcare decisions, a power of attorney will do this for you. You appoint this trusted individual ahead of time to make these decisions, which will keep you safe even when you’re unwell.
5. What About Digital Assets?
Cryptocurrency has become more and more popular, and it is something people forget about when they make estate plans. Make sure these digital assets are included in your estate plan—including keys, passwords, and whatever else your executor needs in order to access them.
6. Not Discussing Ahead of Time
One way to minimize family drama is to discuss ahead of time what you’re planning to do with your estate plan. Keeping communication open will ensure that any questions are answered, and relatives who might feel as though the process is unfair or confusing will be able to talk to you about it for peace of mind. After all, it is your estate plan—don’t allow anyone to pressure you into making decisions with which you’re uncomfortable.
7. Being Overly-Specific
Being overly-specific is another pitfall that a lot of people run into. You might own assets at one time in your life that you don’t own in the future. Are the things you’re putting into your will things that you will definitely have, decades from now? Make sure that whatever you include has lasting potential and longevity.
8. Neglecting Taxes
Don’t forget—an estate plan can help you minimize your tax burden. Talk to an attorney about ways to minimize and eliminate inheritance and estate taxes (legally, of course).
9. Updating Infrequently
Update your estate plan every three to five years or whenever you experience a major life change (wedding, divorce, new baby, etc.). If you update too infrequently, you run the risk of leaving someone out by mistake or having an estate plan that doesn’t reflect your life situation and goals.
10. Improper Trust Funding
A trust is a great tool to have in an estate plan, but you have to make sure it is properly funded. Creating the trust is half the battle, the funding is the second part. With your attorney, discuss ways to ensure your trust is properly funded.
These common mistakes are easy to avoid if you have an attorney. Experienced attorneys will know the pitfalls of estate planning, and they can make sure that you’re being inclusive and sensible when it comes to your plan. Contact WFP today.