Estate planning, for many, is an essential part of protecting your family and personal assets. While each estate plan is custom, there are six common mistakes people should avoid, which include:
Understanding Your Estate Plan: The lack of not understanding your estate plan can create potential risks. Work with your estate planner to understand what your estate plan includes, how it works, and what steps you need to take next. Take notes on key decisions or details throughout the estate planning process, and this will help you recall what you have agreed upon and what you need to do next.
Failure To Update Beneficiary Designations: This common mistake can cause your assets, retirement accounts, annuities, and life insurance to end up going to the wrong person. Review your beneficiary designations every few years or after a significant life event.
Forgetting To Update Your Asset Ownership: Similar to your beneficiary designations, the names of persons associated with your assets or joint assets need to be updated from time to time, to ensure your asset ownership designations meet your needs.
Not Funding Revocable Trusts: People who have a revocable trust, also known as a “living will” forget after their trust is created, your legal titles to assets need to be transferred to the trust. Transferring your assets isn’t complicated or costly, but if you don’t do it, you waste money, you won’t be able to avoid probate, and you won’t receive the benefits of having a trust. Meet with your planner and make sure you understand what you need to do to ensure your plan is implemented and maintained correctly.
Failure To Coordinate Trusts And Retirement plans: Often, people will designate living trusts or other trusts as beneficiaries for their retirement plans. While this is smart, there are potential problems you could experience, such as increased taxes due to IRA regulations. To avoid this, you need to make sure your trust, which is named as the beneficiary of your retirement account, includes specific language stating that it qualifies to be a “see-through trust.”
No Designated Or Updated Powers Of Attorneys: Powers of attorneys are an essential aspect of any estate plan, and if you don’t have any, or you haven’t updated your current ones, it could be problematic. Most estate planners will recommend having at least two power of attorneys, one for your finances and the other in the event you are disabled.
While estate planning is sometimes a difficult topic to discuss, it is essential that you not only create an estate plan, but that you take the time to update it, and make sure it meets your needs now and in the future.