Top 10 Estate Planning Mistakes You Can Make
While all of us understand that we will one day pass away, most of us don’t want to think about this very often. As a result, some people put off drafting a last will and testament or creating an estate plan for so long that they die without ever making these important documents. As you may have guessed, not having an estate plan in place is a huge mistake. If you die without an estate plan, your local government will need to follow the default inheritance laws for your state, which may or may not be in accordance with your actual final wishes. After all, most of us are facing our own unique financial and family circumstances that need to be taken into account. By creating a legally solid estate plan, you can make sure that your wealth and possessions are distributed in the manner you desire.
Below, you will find the most common estate planning mistakes:
Naming Only One Beneficiary in Your WillMost people have a pretty good idea of who they want to name as their beneficiaries. But even if you are 100% sure that, for instance, you want your car to go to your daughter, it’s still a good idea to name a backup or contingent beneficiary. This is usually done to account for situations when your primary beneficiary passes away before or at the same time as you. Experts also recommend naming several contingent beneficiaries to account for all possible scenarios.
Not Making Provisions For Your Underage ChildrenIf you have young children, it is crucial to appoint guardians for them in your will. You should also decide which assets you want to set aside for the children in the estate plan and specify when you want those assets to become available to them. Most people choose to make the money or property available when the child turns 18, 25, or 30 years old, graduates from college, or gets married. All of this can be done by creating a testamentary trust in your will.
Not Making Provisions For Your PetsIf you own pets, make sure that you appoint a guardian and set money aside for their care in your estate plan. You can create a dedicated pet trust or simply include a section with provisions for your pet in your will. Be sure to specify an alternate guardian in case your first choice is unable or unwilling to care for the pet or pets.
Failing to Appoint an Executor or GuardiansWhen making a last will and testament, just listing your assets is not enough. You also need to appoint a trusted executor who will make sure that your wishes are carried out exactly as stated. Additionally, you must list guardians for your pets, underage children, and other dependents in the will. Keep in mind that experts also advise listing one or even several backups for will executors and all guardians.
Forgetting to Mention Digital AssetsSince much of our lives are now carried out online, you definitely need to add a digital assets plan to your will. The plan can include your wishes regarding your social media and email accounts, passwords to your online banking, details about any cryptocurrency you own, etc.
Failing to Fund a Living TrustThis is a very common estate planning mistake that can have devastating consequences for your family. A living trust can be an excellent tool for achieving your estate planning goals, but this document is useless unless you fund the trust properly.
Not Having a Financial Power of AttorneyA financial power of attorney is a crucial component of any estate plan. If you become incapacitated or otherwise lose the ability to make your own decisions, the trusted person you’ve selected in this document will be able to step in and help take care of your finances.
Not Having a Living Will and Medical Power of AttorneyYou can use a living will to list what medical care and life-saving measures you would and would not like to receive if you’re no longer able to make decisions or express consent to medical procedures. A medical power of attorney appoints a healthcare proxy who can make those decisions for you. Some online will-making services offer a combined solution known as an advance healthcare directive.
Failing to Update Your Estate PlanIt’s not enough to make a will once and forget about it for the rest of your life. Experts recommend reviewing and updating all estate planning documents every 3-5 years. If you experience an important life event (e.g marriage) or a significant change to your assets (e.g a house purchase) before that time is up, you need to update your estate planning documents as soon as possible.
Failing to Consult With an AttorneyIf you have a complex family or estate situation, make sure that you consult with a lawyer before finalizing your estate plan.
Concluding Words About Common Last Will and Testament Mistakes
When it comes to estate planning, the biggest mistake you can make is not creating a plan and preparing all the documents in advance. When making your will, it’s important to list one or more backup beneficiaries, guardians for pets and children, and will executors. You should remember to make provisions for your pets and children in the will, create a living will and financial power of attorney, list your digital assets, and fund your living trust. Finally, don’t forget to update your estate planning documents after important life events or every 3-5 years.