A lot of people think that estate planning is nothing more than throwing together a simple will to ensure that assets are passed on to immediate family members. While that might be true for some, others would benefit from a more thoughtful and detailed estate plan. Yet, many individuals put off this holistic estate planning until it’s too late, while others try to handle the matter on their own, which can lead to devastating consequences.
With all of that in mind, it’s wise for you to familiarize yourself with some of the most common estate planning mistakes so that you can be prepared to avoid them.
What are the most common estate planning mistakes?
There are a lot of mistakes that can be made during the estate planning process, but some are more common than others. Let’s look at some of those more prevalent mistakes so that you know how to avoid them.
- Waiting too long: The longer you wait to create a thorough estate plan, the bigger risk you run of having your assets distributed in a way that runs counter to your wishes. In fact, some studies show that fewer than half of all adults in our country have an estate plan. Don’t let yourself fall into that group.
- Failing to revisit and revise your estate plan: Although creating an initial estate plan may allow you to breathe a sigh of relief, the process isn’t entirely over at that point. This is because you should revisit your estate plan from time to time to ensure that it still aligns with your vision. If you’ve acquired new assets, assets have dramatically increased in value, you have a new family member, a beneficiary has died or your relationship has changed with an heir, you might want to revisit and modify your estate plan to reflect those changes and how they impact the distribution of estate assets.
- Overlooking beneficiary designations: There are certain accounts, such as retirement accounts, where you named a beneficiary. If you don’t change the beneficiary designation when appropriate, your assets from that account may fall into the wrong hands. This is because these beneficiary designations are binding, regardless of what your will says. In other words, merely changing your will may not be enough.
- Overlooking tax implications of life insurance: Although the estate tax doesn’t kick in until your estate has considerable wealth, you might get there faster than you think with life insurance. This is because, if you have an ownership interest in the insurance policy, the payout upon your death may increase the value of your estate significantly, which can then leave it subject to significant taxation. To prevent that from happening, you might want to gift your life insurance policy to a trust specifically designed to handle these proceeds.
These are a just some of the common mistakes that are made during the estate planning process. There are others out there, so make sure that you’re being diligent as you try to create the estate plan that is right for you and your loved ones.
Do you need help navigating the process?
There’s a lot to take in when you’re dealing with the estate planning process. In fact, the complexities of estate planning are what drive some people to put it off for far too long. You don’t have to let that happen, though. Instead, you can reach out to a skilled legal team for assistance so that you can feel confident that your estate plan is comprehensive, well drafted and suited to fit your needs.