Estate planning is a touchy subject that is often put off until it’s too late. This kind of unwillingness to face reality can create major hardship, expense, and mess for your loved ones when you leave them behind. However, even people who do overcome their aversion and create a plan can run into trouble if they don’t understand exactly how estate plans function. Here are some of the most common mistakes people make with estate planning:
Not creating a will
Wills are not the heavy lifters when it comes to estate planning documents, but they serve as a solid foundation. A will lets you designate who’ll receive your property upon your death and allows you to name specific guardians for your minor children after you die. Without a will, your property will be distributed based on your state’s intestate laws (which may not follow your personal wishes), and a judge will choose a guardian for your children if they are under 18. If your children are 18 or older, they are likely to inherit everything, but they will have no guidance in how to manage their new assets.
Not updating beneficiary designations
Another problem that frequently crops up is that people forget to change their beneficiary designations to match their estate planning desires. You should check with your life insurance company and retirement-account holders to find out who would receive those assets in the event of your death. If you have a trust, you’ll likely want the trust to be the beneficiary, which is a change that does not happen automatically upon creating a trust.
Please keep in mind that you should never name a minor as a beneficiary of your life insurance or retirement accounts, even as the secondary beneficiary. If they were to inherit these assets, the assets become subject to control of the court until they turn 18.
Not funding your trust
It can be easy to assume that creating a trust is enough for all the assets you list within it to be distributed properly after your death. However, some assets—real estate, bank accounts, securities, brokerage accounts—must be “funded” to the trust in order for them to be actually transferred without having to go through court. Funding involves changing the name on the title of the property or account to list the trust as the owner. Additionally, when you acquire new assets after your trust is created, you must make sure those assets are also titled into your trust.
Not reviewing documents
The core of the next mistake involves a fundamental understanding of what estate planning is. Estate plans are not a “one-and-done” tasks; they require maintenance, just like a car. As time passes, your life circumstances change, the laws change, and your assets change. That’s why you need to “tune up” your plan, updating it to reflect these changes—that is, if you want it to actually run smoothly for your loved ones.
We recommend reviewing your plan annually to make sure its terms are up to date. Furthermore, be sure to immediately update your estate plan following major life events like divorce, births, deaths, and inheritances. These are like your “Check Engine” light switching on, so you know to bring in your plan for review.
Not leaving an inventory of assets
Even after you have funded your estate plan correctly and have maintained it properly, it all becomes a moot point if your heirs cannot find your assets. It might seem like a silly problem, but there’s more than $58 billion dollars worth of lost assets in the U.S. coffers right now, all because someone died or became incapacitated and their assets couldn’t be located.
That’s why part of our process includes creating a detailed inventory of assets, including where exactly to find each asset, including digital assets like social media accounts and cryptocurrency, along with their passwords and security keys.
Beyond these common errors, there are many additional pitfalls that can impact your estate planning. As your Personal Family Lawyer®, we’ll guide you through the process, helping you to not only avoid mistakes, but also implement strategies to ensure your true Family Wealth and legacy will continue to grow long after you’re gone.
This article is a service of Levi Alexander, Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.