5 Common Estate Planning Mistakes—and How to Avoid Them
Estate planning is the process of deciding and documenting what should happen not only to your assets after death but also how you want your affairs handled if you’re ever unable to make decisions for yourself. A good estate plan can provide structure for minor children, establish a strategy for your long-term healthcare, ensure financial support for loved ones, and divide heirlooms and meaningful possessions according to your wishes.
Having an estate plan in place often brings peace of mind, both for you and for your family. Unfortunately, even small mistakes in the process can lead to big consequences. Estate planning errors can cause family disputes, beneficiary issues, unnecessary taxes, and the loss of privacy. Working with an estate planning attorney is the best way to safeguard not only your wishes but also your family’s well-being, both during your life and after you’re gone.
Mistake #1: Not Having an Estate Plan at All
Many people think that estate planning is only for the elderly or the very wealthy. This is a common but serious misconception. Anyone who does not wish for the state to decide what happens to their possessions after their death should have an estate plan in place. Parents, especially those with young children, should make an estate plan as soon as possible. Without doing so, the decision about who will care for your minor children will be left entirely to the court, and without your input, the court may not choose the person you would have wanted.
If you are just getting started with your estate plan, consider the basics like a will and a Power of Attorney. An estate planning lawyer can help you get these essentials in place and ensure that your estate plan is worded, signed, and assembled correctly.
Mistake #2: Not Updating Your Plan Regularly
Another common misconception is that estate planning is one-and-done. Instead, your estate plan will need to evolve alongside any life changes that take place. Here are a few examples of situations where you should consider updating your estate plan:
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Having children
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Starting or selling a business
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Gaining or losing assets
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Creating new accounts
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Reconnecting with family members
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Death of a spouse, child, or loved one
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Moving to a new home
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Volunteering with new charities
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Getting married or getting divorced
Estate planning attorneys suggest reviewing your plan regularly, either every few years or after major changes in your life, to ensure that what you have down still corresponds to your real-life picture.
Mistake #3: Ignoring Beneficiary Designations
It is important to note that certain assets, like retirement accounts, are passed on separately from a will. Neglecting beneficiary designations with these asset classes can create huge problems later on. Check on all of your accounts’ beneficiaries, and keep this information updated along with your overall estate plan.
Mistake #4: Not Planning for Incapacity
Many people think of estate planning as something that only comes into play after death. This could not be more wrong. Instead, estate planning is the best way to account for incapacity, aging expenses, or unforeseen healthcare costs. Healthcare directives as well as Power of Attorney can help ensure that you know and are comfortable with who will make decisions on your behalf.
More than 375,000 Americans become disabled every year. If you are one of them, or if you are in an accident or become seriously injured or sick, having an estate plan in place can ensure that you are taken care of according to your wishes. With the help of an estate planning lawyer, you may also be able to set up a trust or other financial structure to ensure that you have money set aside for health care aides and other end-of-life expenses.
Mistake #5: Trying to DIY
Some people may try to DIY estate planning, especially the basics like wills, using online templates. However, most people’s lives are not one-size-fits-all. An online template simply isn’t adequate for the complex situations that make up many people’s families and finances. What’s more, making even a simple mistake in the language can invalidate a key document or lead to legal loopholes and challenges later on.
Most people won’t know how to spot these errors without a law degree, and even then without specializing in estate planning. Unless your situation is unusually simple, most people will be better off working with an estate planning law firm instead of trying to DIY this vital legal document.
The Bottom Line: Plan Smart, Rest Easy
The consequences of not planning, or cutting corners on your estate plan, far outweigh any benefits. By taking the time to work with an attorney early, you can ensure that your children are protected, your assets are handled according to your wishes, and that there’s a clear plan in place for both unexpected events during your lifetime and what happens after you’re gone.