Sadly, most Americans are indifferent to estate planning – at best – or completely ignore the issue – at worst. When it comes to estate planning, there are some mistakes that you cannot afford to make. Below are five of the most critical estate planning mistakes:
- Not having any estate plan. This is the biggest mistake, especially among younger professionals or young parents who assume they do not need one. Passing away intestate (without an estate plan) will result in state law deciding who ends up with what assets when you are gone. Even the care of your minor children is up to the courts.
- Failing to properly handle paperwork. This is typically in the form of not updating beneficiary designations on insurance and retirement accounts. Some people may be surprised to learn that beneficiary designations override instructions left in a will or trust.
- Not reviewing documents regularly. An estate plan should be reviewed every two-three years, when there’s a new child or grandchild, a significant increase or decrease in assets, new tax laws, or other major life changes. This ensures you are protecting your loved ones’ future because circumstances change over time.
- Not funding your trust. A trust relies on being “funded” (changing title of your assets to the trust) to operate correctly. If you pass away and leave an unfunded trust, your assets will be subject to a probate, which was what you were trying to avoid by creating a trust in the first place.
- Too much given away, too soon. As much as half of inheritances are squandered shortly after being received, so it is important to plan your inheritance instructions over the course of the beneficiary’s lifetime to reduce the risk of this happening.
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Legal Disclaimer – The information provided is designed for general information only and is not intended to be legal advice, nor does it create an attorney client relationship. Consult an attorney before making any legal decisions based on your individual circumstances.