Most people have the best of intentions when it comes to planning their estate. However, in the absence of proper planning, the best of intentions may not be enough. Here are six of the most common estate planning blunders people make:
- Failing to plan. The biggest mistake is not planning in the first place. A lot of people do not think they need an estate plan because they are too young or because they think they have no assets. You are never told old or young to plan. Most people have assets. Doing nothing can lead to unintended consequences, loss of control and extra expense. If you are married, you need to provide for your spouse. If you are a parent, you
will need to have a guardian in place for a minor in the event of your death or incapacity.
- Doing it yourself. It is tempting to try and save money by using a do-it-yourself on line will or trust service. However, consumer beware! These cookie-cutter documents are poorly drafted and often do not fit your particular circumstance. Only a qualified and experienced attorney can tell you what planning opportunities are available and what legal solution is best for you.
- Not planning for your disability/incapacity. Most people tend to focus on their assets, but then forget to think about themselves. A comprehensive estate plan will include planning for your physical/mental disability or incapacity. A great plan will include a durable power of attorney for health care, a durable power of attorney for financial/business decisions and an advance directive—all of which allow another person to act on your behalf when you cannot.
- Failing to fund a trust. Once you draft a plan and sign it, you really are not finished. If your estate plan includes a trust, then you will have to “fund the trust”—by retitling eligible assets into the name of the trustee or the trust. Otherwise, the trust is useless. If you attorney does not offer to help you with the retitling process, then walk away.
- Not checking beneficiary designations. If you have a retirement plan (such as a 401k, 403b or IRA), annuity or life insurance, then you will need to make sure that you have the proper beneficiary designations in place on these documents. These are contractual arrangements made directly with the company. They do not depend on your will or trust. Having an incomplete or out of date beneficiary can be costly.
- Failing to conduct a periodic review of your plan. Once you have established your estate plan, it is important to keep it up to date. Remember that time and circumstances change over your life. If you marry, have children, divorce or inherit a large sum of money, then it is time to revisit your estate plan. Doing this is beneficial in the long run!