This post discusses a variety of important issues related to estate planning, ranging from legal considerations such as creating a will or trust, to practical matters such as naming beneficiaries and planning for incapacity. Hopefully, the content is informative. Here are 9 specific examples of common mistakes that people make in estate planning, as well as suggestions for avoiding these pitfalls.
- Failing to create a will or trust — One of the most significant errors is failing to create a will or trust. If you pass away without a will or trust, your assets will be distributed according to state law in a specific manner. The manner of distribution provided in state law likely will not align with your wishes. It is important to create a legally binding document that outlines how you want your assets to be distributed after you pass away. Failing to create your will or trust will likely result in a more costly and complicated manner of distributing your assets upon your passing.
- Neglecting to update your estate plan — Your life circumstances are constantly changing. Your estate plan should reflect those changes in order to prevent unintended outcomes. It is important to regularly review and update your estate plan, as your priorities, your personal circumstances, and your family circumstances evolve.
- Forgetting to name beneficiaries — Retirement accounts, accounts with financial institutions, and life insurance policies allow you to name beneficiaries. By naming specific beneficiaries to these assets, you can provide for the fastest way of distribution to your named beneficiaries. Failing to name beneficiaries in this manner can result in not only delayed distribution of these assets, but distribution in a manner that you do not intend.
- Overlooking tax implications — Estate taxes and capital gains taxes can significantly impact the distribution and the net value of your estate. There are a number of choices that you can make that will help minimize tax liability. Certain choices can also help ensure efficient distribution of your estate. Experienced estate planning counsel and tax professionals can help you address these issues.
- Ignoring digital assets — In today’s digital age, you may have valuable assets stored online, such as cryptocurrency or social media accounts. It is important to include these assets in your estate plan. Without planning for these assets there is risk that they may be lost. Please take a look at my digital assets blog posted on this website.
- Naming the wrong executor or trustee — The executor or trustee you choose will be responsible for managing your estate and distributing your assets. You should choose someone who is both trustworthy and capable of fulfilling this important role. It is also important to confirm in advance that you choose someone willing to serve. Geographical considerations may sometimes affect your choices.
- Failing to communicate your wishes — Many times, it is a good idea to discuss your estate plan with your loved ones. This can help ensure that they understand your wishes. Communicating can help prevent misunderstandings and conflicts down the road, however the specifics of these discussions depend on your particular family circumstances.
- Neglecting to plan for incapacity — In addition to planning for the inevitable, it is important to plan for the possibility that you may become incapacitated. You may become incapacitated, either temporarily or permanently. Under these circumstances, you may not be able to communicate your decisions on important questions. This planning may involve creating a durable power of attorney, medical power of attorney, and directive to physicians. This type of planning can also help avoid costly and time consuming guardianships.
- DIY estate planning — While it may be tempting to save money by creating your own estate plan, with the help of online resources, this DIY planning can result in costly mistakes and legal challenges down the road. It is important to work with an experienced estate planning attorney to ensure that your estate plan is accomplishes your goals, fits your unique circumstances, and results in cost effective distribution of your estate.
Unfortunately, estate planning is a topic that many people want to avoid dealing with, and just do not want to think about. Confronting your own mortality is hard to do. But, it is important to your loved ones and to yourself to address this subject while you can. With the right help, this can be a fairly painless process for you. I hope this post has helped you identify a number of potential pitfalls. By avoiding these common mistakes, you can help ensure that your assets are distributed according to your wishes, in an efficient and cost effective manner, and that your loved ones are provided for after you pass away.
Nick Caridas – Caridas Law