Sadly, most Americans are indifferent to estate planning – at best – or completely ignore the issue – at worst. When it comes to estate planning, however, there are just 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 don’t need one. Passing away intestate – or without an estate plan – will assure local law decides who ends up with what assets when you are gone. Even the care of your children is up to the courts. Dying intestate means your estate has to go through probate, which is a lengthy, expensive, and annoying process for your family to have to endure.
Failing to properly handle the paperwork.
People typically do not update beneficiary designations on bank, 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 three to five years, when there’s a new child or grandchild, a significant increase or decrease in assets, or moving to a new state. This ensures you are protecting your loved ones’ future because circumstances change over time.
Not funding your trust.
An empty trust won’t work. Every trust must be “funded” to operate correctly. That means you must formally “assign” your assets to the trustee of the trust, or retitle your assets in the name of the trustee. If you pass away and leave an unfunded trust, your estate will have to go through probate – which is 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 all inheritances are squandered shortly after being received. Current best practices require giving an independent trustee 100% discretion over assets, to protect inheritances from being spent irresponsibly, and to protect trust assets from creditors of the beneficiaries.
While no one wants to think about their own incapacity or death, please don’t ignore the topic of estate planning altogether. Avoid making these mistakes and leaving your family at financial risk. Contact us today to build a well-crafted plan for you and your family.