Estate planning mistakes can be costly in time and money.
Everyone makes mistakes.
It is part of being human.
Sometimes these missteps are made out of ignorance.
Other times they arise from forgetfulness.
According to a recent Kiplinger article titled “5 Common Estate Planning Mistakes to Avoid,” the reasons for estate planning mishaps do not make a difference on the outcome.
Improper estate planning cannot be fixed after your death and can lead to significant issues with taxes and asset distribution.
How can you avoid common mistakes?
Plan for incapacity.
There is more to estate planning than distributing assets through a trust or a last will and testament.
Estate planning involves making preparations for times when you become unable to make choices for yourself.
Accident, injury, or illness can lead to an immediate or swift decline in physical or mental functioning.
When incapacitated, it is helpful to have a trusted agent legally ready and able to make medical decisions and take financial actions on your behalf.
Outline funeral and burial wishes.
Another mistake people make is neglecting to address funeral wishes or to place them in the last will and testament.
Because the last will and testament is typically reviewed when probate begins, the time for the burial or cremation has likely passed.
You should write your wishes and communicate them clearly to your children.
The last thing they need is to be scrambling to locate your plan.
Be sure to clarify whether you would like burial or cremation, where you would like to have the funeral, who you would like to conduct the service, and what you would like included in the memorial.
You should also let your loved ones know if you have made any advanced arrangements and payments.
Address the tax implications of transferring property.
Taxes are a significant part of life.
Taxes also can also rear its ugly head in death.
Working with an experienced estate planning attorney allows you to be more strategic with your giving and reduce your tax liability.
Name backup agents and executors.
Often people make a mistake of naming only a parent or a spouse as the executor or power of attorney.
Sometimes these family members die before or at the same time as the person who created the documents.
If this happens to you, then your affairs may be left to someone you did not choose.
It is best to name backups to serve in these roles in case something happens to your first choices.
Clarify and update beneficiary designations.
You may want your children to received equal shares of the estate assets.
If yes, then you will need to make sure your comprehensive estate plan is updated and takes into account all of your assets.
You should name beneficiaries on the life insurance policies and transfer on death accounts in addition to listing heirs in your last will and testament.
The best way to create an effective estate plan and avoid common mistakes is to work with an experienced estate planning attorney.
Reference: Kiplinger (Oct. 20, 2022) “5 Common Estate Planning Mistakes to Avoid”