An estate plan comprises a Will, Trust, and other legal documents, which are designed to help your loved ones cope with all the legal arrangements after your death. People make several mistakes while preparing their estate plan, resulting in severe consequences. If you have not completed all necessary estate planning documents, you can make significant mistakes in your estate planning that could cost your family a lot of money in the end.
7 Estate Planning Mistakes To Avoid
Proper estate planning ensures that your children and other family members won’t be disinherited because of bad decisions you’ve made. It also ensures that your assets are distributed per your wishes, and your family members can maintain their standard of living after you pass away. While planning an estate plan may be difficult for many people, there are some mistakes to avoid when creating an estate plan.
1. Not Involving a Lawyer When Writing Your Will
One of the worst mistakes you could make is writing your own Will because this means you either don’t have a lawyer to help you or failed to consult with one when writing the documents. Even if you can quickly draft your own Will, it’s best to seek an attorney who is experienced in estate planning to ensure that it adequately addresses all the issues you want to include in the documents. A lawyer can help review and correct potential mistakes and ensure that your estate plan is by the laws of your state. In addition, the lawyers will advise on trusts and asset protection issues that you may not be familiar with. Some people also fail to keep their estate plans updated because they don’t think it needs regular reviews. However, this is a big mistake because laws change regularly, and you may also have had changes in your life since the time you created your estate plan. To avoid this mistake, review your estate documents regularly with an experienced attorney so they can make the necessary changes as needed.
2. Not Documenting Your Assets Properly
Another problem people run into when creating their estate plan. People run into a problem is not documenting their assets properly because they don’t know how to value them or forget about specific items, investments, and accounts. The result of this mistake may lead to serious tax consequences for your family members because the IRS requires an accurate account of all taxable assets, which must be disclosed on your final tax return after your death. To avoid this mistake, make sure you keep a list of all your assets and important information about them, which will come in handy when preparing your estate plan.
3. Not Conserving Your Estate Plan Documents Carefully
Many people mistake not keeping their estate planning documents carefully because they either lose the documents or misplace them. The result is that it becomes impossible for family members to find the legal documents relating to their inheritance and tax implications. To avoid this problem, keep copies of all necessary documents (and not just one) in an accessible place like a safe deposit box at your bank. Also, give copies to each beneficiary you have named in your Will so they can act accordingly if something happens to you before implementing your estate plan. You should also inform loved ones like your next of kin where to find all the copies of important documents relating to your estate plan.
4. Not Thinking About Inheritance Tax Consequences
Tax consequences can be a big problem for those who haven’t taken proper steps to implement their estate plan and haven’t thought about inheritance tax consequences. These taxes usually apply if you make gifts or leave assets worth more than $5 million (or $10 million per married couple) by the end of the calendar year in which you die. To avoid this mistake, consult an experienced attorney who has experience with this type of taxation so they can advise you accordingly when preparing your estate plan documents.
5. Not Ensuring That Your Beneficiaries are Eligible to Receive Assets
Many people make one mistake when creating their estate plan is not making sure that an individual or other entity is eligible to receive the assets you want them to receive. For example, one common problem occurs when grandchildren are named beneficiaries of your estate, but they don’t yet exist at the time of your death. This means you need to ensure who would inherit if all your grandchildren die before receiving any assets from their grandparent’s Will. It’s best to consult with an experienced attorney who can review and update your documents accordingly if needed or discuss alternatives like life insurance that could help address these issues to avoid this issue.
6. Not keeping Your Estate Plan Up to Date
Another mistake many people make is not keeping their estate plan up to date. For example, suppose you remarry after creating your estate plan. In that case, your new spouse should be named as a beneficiary in the documents, or you need to update important information like contact details for friends and family members who are beneficiaries because they may have moved since the time you drafted the documents. To avoid this mistake, review your estate plan regularly with your lawyer to ensure that it’s still relevant according to any changes that may have occurred over time.
7. Not Discussing Your Wishes With Loved Ones
Many people never discuss their wishes with a loved one because it makes them feel uncomfortable or assumes that they will deal with it later when circumstances force them to do so. Unfortunately, these plans that are left unsaid often don’t come to fruition as expected, which causes a lot of arguments and disagreements between loved ones that could have been avoided if they had just talked about it beforehand. To avoid this mistake, speak with your loved ones now so you can enjoy peace of mind knowing that those closest to you understand how you would like to be treated if they were ever in a situation where they needed to make crucial decisions on your behalf.
Most estate planning mistakes are preventable. An ounce of foresight today can help ensure a comfortable and secure tomorrow. The good news is that many simple estate planning mistakes can be avoided by following some very straightforward guidelines. Don’t get caught unaware; plan ahead.
- 1 7 Estate Planning Mistakes To Avoid
- 1.1 1. Not Involving a Lawyer When Writing Your Will
- 1.2 2. Not Documenting Your Assets Properly
- 1.3 3. Not Conserving Your Estate Plan Documents Carefully
- 1.4 4. Not Thinking About Inheritance Tax Consequences
- 1.5 5. Not Ensuring That Your Beneficiaries are Eligible to Receive Assets
- 1.6 6. Not keeping Your Estate Plan Up to Date
- 1.7 7. Not Discussing Your Wishes With Loved Ones