Regardless of your age or financial situation, estate planning, the process of preparing for the transfer of wealth upon decease, is a process that benefits everyone. While it is not unheard of for people to make mistakes with regard to their estate plans, there are certainly ways for individuals to avoid making some of the most common estate planning errors. Here are the top five mistakes in estate planning and brief tips on how to avoid making them.
- Waiting until the Last Minute
The fact is we can’t plan for everything that occurs in our lifetime and picking a “right time” to start planning is a risky game. Thinking that you’re too young or not wealthy enough to have an estate plan is no excuse for not having a plan. What are you waiting for? If you wind up in the hospital or become incapacitated, what happens next? With no guidelines and no plan, you may very well end up in a dead end with no way of ensuring that your assets end up in the right hands. To avoid this situation, seek a professional to help draft and review your estate plan to make sure that your assets are distributed consistent with your intentions, whenever the time comes.
- Not Seeking Professional Help
As the role of technology has steadily increased in our daily lives, a sizable increase has followed of people taking to the web to prepare their estate plan. The fundamental issue with this trend is that, in essence, estate planning is a legal process that requires careful adherence to applicable probate laws. Experience, knowledge, and legal skills of a professional are things that the internet simply cannot replace. Moreover, only an attorney can notarize a will! Without a doubt, you are more likely to make mistakes when preparing your estate plan by yourself, and therefore, it is highly recommended that you meet with a licensed attorney for all your estate planning needs.
- Failing to Update Your Documents
If you start something, be sure to finish it, or at least keep up with it. Having an estate plan is one thing, but making sure it is up-to-date is another. There are many changes that can occur throughout a lifetime that can make it less practical to rely on an estate plan that does not account for said changes. Common factors such as having children, marrying, divorcing, changes in estate planning laws, and acquiring new assets are all significant changes that can impact the validity of your estate plan. When updating your documents make sure that all the changes are specified and signed as well as marked with the appropriate date. You should also provide a statement revoking all old wills, leaving valid only the updated will.
- Not Accounting for Taxes
Another important factor to be aware of is that your estate plan could be subject to taxes depending on the size of your estate. If you anticipate that your beneficiaries will owe large sums in taxes, you may want to look into effective strategies to minimize estate and income taxes. Some of these strategies include locking away the assets in a trust, or making use of the $15,000 gift tax exemption implemented by the recent tax reform, by making yearly gifts to your beneficiaries to decrease the size of your estate.
- Not Focusing on the Basic Components
Don’t beat around the bush. Declare who gets what, what goes where and what happens when. Carefully and clearly declare how you want your assets to be distributed. You don’t want your family to be left in the dark regarding which assets belong to each beneficiary. The more detailed your estate plan is, the better. After all, these are your life possessions at hand.