Five Big Mistakes You Could Make with Your Estate Plans
Estate professionals see many of these plans go into place, and many of these plans going awry. When you work with us, we can help steer you away from potential missteps. In the meantime, though, here are some of the biggest mistakes people make, so that you know what to watch out for.
People overlook that second or third marriages require planning as well
Blended families are wonderful, of course, but they carry with them their own sets of challenges. Sometimes these challenges can overwhelm people, and get in the way of considering financial concerns. It is much more common for first marriages (or only marriages) to have proper estate planning, than it is for later marriages. For one thing, when an earlier spouse dies, sometimes the children and grandchildren of that first marriage are left with nothing. Of course, this can be easily avoided with join accounts and additional life insurance. It is merely a question of putting these plans into action.
People don’t keep up with their estate plans
As family members graduate from college, move to other states or countries, or — heaven forbid — pass away, estate plans need to be updated. As children marry, or divorce, or have their own children, you need to update your documents too. Also, as tax laws change, the amounts that can pass as tax-free gifts can change. So can the estate taxes and other laws for each state. After a major life event – a birth, death, marriage or divorce — you should re-visit your estate plan. In the absence of a major life event, you should still re-visit and possibly revise your plan every five years.
People designate their beneficiaries inaccurately
Joint accounts are tremendously helpful tools. Bank and brokerage accounts which are jointly owned transfer automatically, which saves everyone research time and labor time after a death. There are details to take into consideration, however, especially regarding 401(k) plans and IRAs. Having the proper type of beneficiary designation can avoid additional taxes. In many cases, it is merely a question of having the proper titles attached to each account.
People try to draft these documents themselves
Many internet sites claim to help you craft your own estate plans and make your own legal documents. Even on the occasions when these sites get it somewhat correct, and have updated documents that appear valid, it is not that easy. Enacting the documents, and executing them in such a way that the state recognizes them, is another matter entirely. If a Will is executed improperly, for example, it is immediately invalidated. Having a professional draft and execute your documents will eliminate all of the guesswork and uncertainty.
People do not account for disabling conditions or accidents
It is one set of concerns to consider what happens in the event of your own death. Many people put Wills and living trusts into place, and these address what happens if they die. But what happens if you are incapacitated? What happens if you are still alive, but cannot act on your own behalf in financial or legal matters? Health care directives, durable powers of attorney, and other instruments are necessary to have in place — even if your incapacitation is temporary. You can appoint an agent of your choosing to handle sensitive matters for you while your injury makes you unable to represent yourself. Then, when you have recovered, you can resume control of all of your legal and financial details.