Five Estate Planning Mistakes to Avoid

One small mistake in your estate plan can result in massive headaches during the settlement process, and it’s important that you regularly revisit the plan to make sure it’s valid and up to date.

A valid and current plan is vital to ensure that your assets are dispersed efficiently after you pass, and as you had planned.

However, there are a number of common mistakes that can render an estate invalid. You’ll want to avoid these five:

1. Not having an estate plan — Neglecting to establish an estate plan is the most serious mistake you can make. If you die without a will or estate plan, your assets will be distributed by your state’s court system in accordance with the state’s intestacy statutes. The benefit of having an estate plan is that your assets are distributed according to your wishes.

2. Forgetting to update beneficiaries — Various events may affect who will receive your property, including a marriage, divorce, birth of a child or grandchild and a death among your beneficiaries. If any of these events occurs, you’ll want to revisit your plan and clearly list who will receive your assets.

Besides the estate plan, you’ll need to update your financial, retirement and insurance policies as well as your will, trust and other legal documents.

3. Not funding a revocable trust — You need to fund your trust, otherwise your assets will go through probate and potentially be improperly distributed to your heirs. Some assets are easy to fund a trust with, but it gets trickier with tangible property like a house or vehicle. Discuss this with your estate planning attorney.

4. Not keeping good records — Many inheritances go awry because the family can’t find all of the required documents, including life insurance policies, retirement accounts and deeds. You should have a detailed letter of instruction that informs your executor where all of your documentation is. The letter should include the names and contact information for your financial planner, insurance agent, banker, lawyer, etc. The letter should also list all of the websites for your financial and insurance accounts, including usernames and log-ins. 

5. Failing to create or update a power of attorney — Having in place a power of attorney will let a responsible person make decisions on your behalf if you become incapacitated through injury or a medical problem. You can even create multiple powers of attorney. You can have one that gives financial decision-making to someone you trust, while another power of attorney would authorize them to make medical decisions for you.

Leave a Reply