There are moments in our lives – a rough first date, high school, the 1980s, etc. – we can look back at and have a quick laugh as we wonder, “Hoo-boy! What was I thinking?” The time you spend with an attorney crafting your estate plan should not be one of those moments.
Here’s a list of seven common mistakes people make in the estate planning process. Hopefully, you can recognize any you’ve made, correct them, and avoid causing your loved ones some unnecessary stress when they are grieving your loss.
Mistake #1: Not having an estate plan
People who die without a will or a trust – those who “die intestate” — force their loved ones to spend time with a heartless court clerk who divvies out their assets in a cold, wood-paneled meeting room. Nobody wants this to happen. That’s why the biggest estate planning mistakes is not having a plan at all. Luckily, you’ve taken a big step toward avoiding this mistake just by visiting this website. Sign up for one of PlanningCommunity.org’s free estate planning webinars today and keep moving forward.
Mistake #2: Thinking everything will be O.K.
There’s a chance you’ll die in your favorite chair next to a freshly updated copy of your will and everything will be O.K. But what happens if you develop dementia and can’t make your own decisions? Or, what happens if you get COVID-19 and spend your final days in the ICU? Including a power of attorney and an advanced directive in your estate plan won’t keep these outcomes from happening to you. But having these documents – which spell out your wishes – will help your loved ones to handle some tough times.
Mistake #3: Thinking it’s over
Life doesn’t stop when you sign your Last Will & Testament. Births, deaths, marriages, and divorces can change the makeup of your family and heirs. A strong housing market or a bad week on Wall Street could impact the value of your estate and how it gets distributed overnight. Update your estate plan regularly, so you don’t leave anyone or anything out. Set up meetings with your estate planning attorney and your executor/trustee to make these changes and know how much they’ll cost when you start the estate planning process.
Mistake #4: Forgetting about Uncle Sam:
Forgetting the taxes and fees the government will collect from your estate is another big estate planning mistake. It’s also why you should hire a well-trained estate planning attorney who can structure your estate and reduce its tax burden. And speaking of taxes, don’t forget to talk to your heirs about what they might expect when you die. A decent inheritance could quickly turn someone who plans vacations with their tax refund check into one of 14 million Americans who owes the IRS money at the end of the year.
Mistake #5: Cutting corners
Some people think they can bypass the estate planning process by putting their child’s name on an asset – a house, a car, a retirement account, etc. – he or she will inherit in the future. Those people are taking an unnecessary risk. Sharing an asset’s ownership in this way also shares it with any of your child’s lenders who could seize your property to collect a debt. It could also impact your child’s ability to qualify for need-based programs like student aid.
Mistake #6: Being equal, not fair
Treating your heirs equally means guaranteeing each of your three children gets 33.3 percent of your estate’s net cash value. Treating them fairly recognizes each child is different may be entitled to a bigger or smaller share than their siblings. For instance, do you want the child who served as your live-in caregiver to receive the same inheritance as one who went to Paris and didn’t come home until the funeral? Or, do you want a disabled child who will need financial assistance the rest of their lives to get the same as one who has a career?
Mistake #7: Keeping things quiet
Losing a spouse or a parent is easily one of the most emotionally trying things a person can experience in their life. Throw a dispute over an antique table or a seemingly unfair distribution of assets into the mix, and you’ve lit a spark that could set the world on fire. That’s why you must openly discuss your estate planning decisions with the people you love. While they may disagree with your choices, they’ll at least understand them and may think twice about challenging them in court.
Next Steps: Making an estate plan can be overwhelming. We recommend attending one of our educational events. This tool will find one in your area.
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