A well-designed estate plan will enable you to achieve important objectives such as protecting your assets, planning for long-term care, and providing for your loved ones. At the same time, estate planning can be complicated and some may fail to understand how their plans actually work. By working with an experienced estate planning and elder law attorney, you can avoid these common estate planning mistakes.
Common Estate Planning Mistakes
Not Having a Will
This is the most basic estate planning document that establishes how your property will be managed and distributed after you die. A will also allows you to designate testamentary guardians to care for your minor children. Without a will, your property will be distributed according to the state’s intestacy laws and the court will also intervene to make determinations about guardianship. While some may be tempted to rely on a form document downloaded from the internet, a will must be prepared and executed according to state law, which makes having proper legal representation essential.
Not Updating a Will
Creating a will is a necessary first step, however, this is not a once and done arrangement. Given the changes that occur over a lifetime (e.g. marriage, buying a home, starting a family, accumulating wealth, retirement), a will should be updated periodically to reflect these changes. Similarly, beneficiary designations on life insurance policies and retirement plans (e.g. 401k, IRA) should also be aligned to your estate plan.
Incapable Heirs
While we like to think that are heirs are deserving and will be able to manage an inheritance, some may not understand finances or have difficulty managing debt. One way to protect these individuals from themselves is to establish a spendthrift trust which allows you to designate a trustee to manage these assets for the benefit of the beneficiary.
Appointing the Wrong Executor
Estate planners often designate a close relative or trusted friend as their executor. Given that an executor is considered a fiduciary and can be held liable for mistakes and misconduct, however, it is crucial to ensure that the person you select be capable and reliable. Appointing the wrong executor could lead to a dispute that becomes a protracted and costly court battle. Above all, the designated executor must have the skills, judgment, and integrity to act in this capacity.
The Takeaway
Today, over 60 percent of Americans do not have a will. Some may think that they don’t need an estate plan because they are unmarried, childless, or do not have significant assets. In reality, however, everyone has an estate, which makes estate planning crucial for anyone. The best way to avoid common estate planning mistakes is to work with an experienced estate planning attorney.