Avoid These Common Estate Planning Mistakes
The biggest estate planning mistake anyone can make is not to plan at all, but instead to leave your assets to the government to divvy up upon your death. If you’re thinking about how you want your possessions to be allocated after you pass, you will also want to consider these additional common missteps made by those drafting a will.
Remember that your will needs periodic updates.
Drafting a will is not a one-time event. Life circumstances will change. You or your child may have additional children or divorce. A child may make plans to go on to an expensive graduate program that you’d like to support, whereas another child may become self-sufficient at a younger age. You may experience a falling-out with a family member, or move to a new state where laws governing wills and trusts are different. These circumstances all warrant a review by you and your estate planning attorney, to ensure that your will is the most accurate possible reflection of your wishes when you go. Relatedly, a periodic review will also offer you the opportunity to review the beneficiaries you’ve listed on any retirement or life insurance policies. These beneficiary designations are not tied to the heirs listed in your will, and you will need to make manual changes to alter who is or is not listed as a beneficiary.
Ensure that you’ve created all important documents and left them where your family and executor can find them.
When you’re writing a will, take the opportunity to have your attorney create a medical advance directive as well. Also known as a “living will,” this document will authorize someone you choose to make decisions about your health should you become incapacitated, and it allows you to dictate what sort of life-preserving measures should be taken on your behalf, including forced feeding or other life-sustaining treatment that cannot cure you. Additionally, while you may create a will when you’re still far from old age, you never know when an accident or sudden illness might cut your life short. Be sure to notify the person you choose as your executor of where you keep your will, and gather all important documents and records that your executor will need in the same location.
Consider the benefits of trusts.
Using trusts as a key component of your estate can save your heirs from the time and hassle of probate, and can also offer you some control to put conditions on how and when your heirs may obtain those assets. Additionally, trusts can offer a substantial tax savings to your heirs. For example, proceeds from a life insurance policy can come with a substantial tax burden. Using a life insurance trust to serve as the owner of those proceeds can help your beneficiary avoid these costs.
