03.11.22

7 Estate Planning Pitfalls to Avoid


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Estate planning is not a one-size-fits-all type of process. The path taken depends on the amount of assets in the estate, the goals for the estate and the complexity of relationships within the family.

Unfortunately, it takes a big event like a health scare to shake us out of our procrastination with estate planning to get the process underway. It may be uncomfortable to plan for your own demise but estate planning is the best way to maintain control of your estate and minimize risk after you’re gone.

Because estate planning impacts the loved ones we leave behind, we want to be certain that our planning is accurate and fully reflects the goals for our estates. There are some avoidable mistakes that are quite common in estate planning. Let’s take a look.

1.  Beneficiary designations are outdated.

Bank accounts and investment accounts require a beneficiary when they are opened. Many people never revisit these designations over the years and end up giving their accounts to a parent or sibling rather than a spouse. A will does not override a beneficiary designation.

2.  Not fully understanding the plan.

Once the process begins, be an active participant. Do not sit back and let your planner make decisions for you. Those decisions may end up being the wrong ones for your family.

3.  Asset ownerships are outdated.

If you own any assets jointly with someone, these arrangement need to be reviewed from time to time. Does the arrangement still make sense to you and your estate?

4.  Revocable trusts are not funded.

Revocable trusts, or living trusts, allow assets within the trust to avoid probate. The planner of the estate creates the trust, the papers are signed but the trust is never funded.

5.  Powers of attorney are outdated.

Every estate should have a medical power of attorney and a financial power of attorney. Most likely, these documents will be some of the first documents you will need as you reach the beginning of the end. Those who have powers of attorney may not be updating or reviewing them.

6. Coordinate trusts and retirement plans.

Some planners prefer to name a trust as a retirement plan beneficiary. However, if specific language is not included in the trust, the estate can incur unneeded tax liability. Review this with your estate planner.

7. Review and update your estate plan.

Any time there is a major change in your family…a new baby, a second marriage, a death in the family…the estate plan should be updated. Additionally, a change in your assets, an increase in wealth, and change in the law, should all be triggers for you to contact your estate planner to review your plan. 

Once your estate plan is complete, don’t put it on a shelf and forget about it. Treat it as a living document that should be revisited several times before you die. A solid estate plan is the best gift that you can give the family that you leave behind. As they grieve their loss, they will be comforted knowing that a stressful and anguishing estate distribution will not be a part of their healing journey.