Sadly, most Americans are indifferent to estate planning – at best – or completely ignore the issue – at worst. When it comes to estate planning, however, there are just some mistakes that you and your loved ones cannot afford. Some mistakes involve ignoring common sense such that it would be like seeing a wad of gum in the road, but stepping on it anyway. Others mistakes are not so obvious. That’s why we want to share with you five of the most critical estate planning mistakes. Remember, knowledge is power.
- Not having any estate plan. This is the biggest mistake, especially among younger professionals or young parents who assume they don’t need one. Passing away intestate – or without an estate plan – will assure local law decides who ends up with what assets when you are gone. Even the care of your children is up to the courts.
- Failing to properly handle paperwork. This is typically in the form of not updating beneficiary designations on insurance and retirement accounts. Some people may be surprised to learn that beneficiary designations override instructions left in a will or trust. This also includes trying to use a “do-it-yourself” service to generate form legal documents. Without being able to consult with an experienced estate planning attorney, the risk is much higher that your plan will not work when you will need it to and is merely providing you with a false sense of security. Just like you can get a lot of health information online, it will always be better to see a doctor or other health professional for a proper medical diagnosis.
- Not reviewing documents regularly. An estate plan should be reviewed every three to five years, when there’s a new child or grandchild, a significant increase or decrease in assets, or moving to a new state. This ensures you are protecting your loved ones’ future because circumstances change over time.
- Not funding your trust. A trust relies on being funded to operate correctly. If you pass away and leave an unfunded trust behind a probate case – what you were trying to avoid by creating a trust in the first place – is required to fund your trust post-death.
- Too much given away, too soon. As much as 50 percent of inheritances are squandered shortly after being received, meaning that it is important to space out inheritances over the course of the beneficiary’s lifetime to reduce the risk of this happening.
While no one wants to think about their own incapacity or death; this is precisely why many avoid the topic of estate planning altogether. Avoid making these mistakes and leaving your family at risk. Contact us today to build a well-crafted plan for you and your family.
