The vast majority of Americans do not have a will or any other estate plan in place, and it can cause many problems for the surviving family members after the death of a loved one. According to Forbes, over 70% of Americans don’t have a will or estate plan.
Estate planning is a necessary process that helps control what happens to your belongings and your family after you die. However, estate planning is not always straightforward. There are many different moving parts to consider, and it’s easy to make mistakes.
This article will discuss some of the most common estate planning mistakes.
1. Not planning for incapacity
One of the most common estate planning mistakes is not planning for incapacity. It means not having a plan in place if you become incapacitated and can no longer make decisions for yourself.
It can be a significant problem because, without a plan, your family will have to make decisions for you without knowing what you would have wanted. In addition, it can lead to arguments and conflict among family members.
2. Not updating your plan
Another common mistake is not keeping your estate plan up to date. As your life changes, your estate plan should change with you. For example, if you get married, have children, or acquire new assets, you must update your estate plan to reflect these changes. Otherwise, your plan may not be valid or may not achieve the results you want.
Usually, a probate lawyer works after the death of a person to help settle the estate. However, they can also help make changes to an estate plan while the person is still alive.
3. Not communicating your plan to your family
Another mistake people make is not communicating their estate plan to their family. It’s important to let your loved ones know what you have planned and your wishes. Otherwise, they may not be able to carry out your wishes after you’re gone. Besides, they may not even be aware of the existence of some of your assets. Hence, proper communication is key to avoiding misunderstandings or conflicts later on.
4. Not planning for taxes
Another mistake that people make is not planning for taxes. For example, your estate may be subject to federal and state taxes when you die. Also, if you have a trust, it may be subject to taxes.
If you don’t plan for these taxes, your family may have to sell assets or take on debt to pay them. It can be a major financial burden for your loved ones. Moreover, it can also reduce the amount of money they inherit from you.
5. Not using a trust
A trust is a legal entity that can hold assets on behalf of another person. Trusts are often used to avoid probate, minimize taxes, and protect assets from creditors. However, many people don’t use trusts because they are unfamiliar with them or think they are too complicated. It is a mistake because beliefs can be beneficial, especially for larger estates.
6. Not working with a professional
Many people try to do their estate planning independently without working with a professional. It is a mistake because estate planning can be very complex. Working with a professional can help ensure that your estate plan is valid and achieves your desired results. You need to be aware of many different laws and regulations, and it’s easy to make mistakes. However, it would help if you worked with a qualified estate planning attorney.
7. Not reviewing your life insurance policy
One of the most common mistakes people make is not reviewing their life insurance policy. Life insurance policies are often overlooked after they are purchased, but it’s essential to check them periodically. It is because your life insurance needs may change over time. For example, you may need to increase your coverage if you have more debt or dependents.
8. Not having a will
A will is a legal document that specifies how you want your assets to be distributed after you die. If you don’t have a will, your assets will be distributed according to your state’s laws of intestate succession. It means that your assets may not go to the people you want them to. Furthermore, if you have minor children, the court will appoint a guardian for them.
9. Having an outdated will
Another mistake people make is having an outdated will. Wills should be reviewed and updated regularly to ensure that they reflect your current wishes. If you don’t update your will, it may not be valid or may not achieve the results you want. For example, if you get married or have children, you will need to update your will to include them.
10. Not planning for long-term care
Another mistake people make is not planning for the possibility of needing long-term care. It is a mistake because long-term care can be costly. If you don’t plan for it, your family may have to sell your assets to pay for it. There are several ways to plan for long-term care, such as buying long-term care insurance or investing in a health savings account.
11. Not updating beneficiary designations
Many people forget to update their beneficiary designations. It is a mistake because they can take precedence over your will. If you die, your assets will be distributed according to your beneficiaries, even if they are different from what you specified in your will.
So, make sure to keep the beneficiary designations up to date. For example, suppose you have a life insurance policy with an ex-spouse as the beneficiary. Your ex-spouse will receive the death benefit, even if you are remarried and have children.
The Bottom Line:
Estate planning can be a complex process, and it’s easy to make mistakes. To avoid making these mistakes, you should work with a professional. Furthermore, you should regularly review your life insurance policy, have a will, update your will regularly, and plan for incapacity and long-term care. Finally, don’t forget to update your beneficiary designations. Doing all of this will help ensure that your assets are distributed according to your wishes.