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Estate planning is a complex element of any financial plan. It requires an in-depth knowledge of trusts and the tax consequences of various approaches. It requires making assumptions about your future and protecting downside risk. And it’s an ever-evolving process that needs to be reviewed with some degree of frequency.
I’ve played a lead role for many of my clients, working with their estate attorneys and CPAs, to build a plan that meets their goals for their lifetime and beyond. Through this work, I’ve seen quite a few common missteps that I thought I’d share:
10 common estate planning missteps:
1. Not having an estate plan is the most common estate planning mistake. Planning for what will occur after you’re gone is one of the most important things you can do to ensure your affairs are in order and your loved ones are taken care of when the time comes.
2. Not naming a Power of Attorney and Healthcare Proxy is problematic if you become incapacitated. You can choose the same person for both or designate one for financial decisions and the other for medical. These roles typically dissolve upon your passing.
3. Not updating your will for changes that can take place within a family or business structure, such as births, deaths, divorces, and new property acquisitions could mean you may not be leaving assets to those you intend.
4. Not planning for unexpected or long-term disability can often have devastating consequences on your personal and financial affairs. You need to determine ahead of time who will make financial, family, and healthcare decisions on your behalf.
5. Putting your child's name on the house may seem like a good idea as you get older, but by doing so, you are giving your child a hefty-sized taxable gift. There are better ways to accomplish what you are looking to do.
6. Choosing a spouse or child to handle your estate may not be the best choice. Someone not as personally invested may be better suited to objectively oversee the extensive duties and demands required of an executor, trustee, or guardian.
7. Not having a contingency plan can be an issue if the person named to serve as a power of attorney, guardian, or executor is unable or unwilling to serve, a guardianship proceeding would have the courts decide who’s in charge.
8. Not updating planning after major life events, such as moving to a new state, getting separated, divorced, or remarried, as well as the birth, death, or marriage of a beneficiary can all have significant impacts on ensuring your wishes are carried out.
9. Not making final arrangements could put an added burden on your loved ones. Planning in advance about your funeral or burial preferences can be a blessing for those you leave behind. You should also make your end-of-life care wishes known.
10. Not securing your estate plan documents could waste all your efforts if your heirs cannot find them. Putting the plan in a safety deposit box is not the best option because it can become complicated when your loved ones try to gain access after you’re gone.
If you, or someone you know, would like to discuss your current estate plan or are considering creating one, I’d love to help.
Related: Who Is Your Trusted Contact?