Research shows that 2 out of 3 adults don’t have a will.
Does this sound familiar to you? If so, it’s not too late to make a change!
If you’re not sure where to start when it comes to estate planning or are worried about messing up, keep reading. Listed below are 8 of the most common errors with estate planning, along with tips on how to avoid them.
Why Do You Need an Estate Plan?
There’s a lot of confusion surrounding estate planning, how it works, and why it’s so important to think about the future. Here are some of the most important reasons to create an estate plan sooner rather than later:
- Provide for your family and loved ones
- Protect and make plans for young children
- Avoid major taxes
- Prevent disagreements and fights between beneficiaries
In a nutshell, an estate plan helps to make life easier for your family and loved ones after you’ve passed away. It gives them clear instructions to follow, prevents confusion, and ensures that your beneficiaries are supported financially.
8 Common Estate Planning Errors
Now that you know why estate planning is important, let’s break down some of the estate planning errors people tend to make. Here are the 8 most common ones:
1. Making a Plan But Not Implementing It
These days, especially in the age of digital estate planning, it can be easy for people to fall into the trap of making a plan but not following through with it.
You might think you have a clear idea of how you want your estate to be distributed after you’ve passed away. However, none of your ideas mean anything if you don’t take the extra steps of meeting with a lawyer, filling out the proper paperwork, and putting everything in writing.
Once you’ve decided that you want to create an estate plan, set up an appointment for a consultation with a lawyer. They can guide you through the process and ensure you follow through and implement your plan.
2. Focusing on Individual Assets
When creating an estate plan, it’s easy to get caught up in assigning individual assets to individual family members and loved ones. The problem with this approach, though, is that it’s time-consuming and isn’t always future-proof.
Remember, you don’t know exactly what your estate will look like when you pass away. This is why lawyers and estate planning experts typically recommend assigning percentages of the estate’s value to different people, rather than trying to give everyone specific amounts or assets.
3. Not Funding Your Trust Correctly
Figuring out funding for trusts can be confusing, but it’s also an essential step in the estate planning process. If you don’t fund your trust by transferring assets to it, there won’t be anything for your beneficiaries to receive after you’ve passed away.
Your lawyer can walk you through this step and ensure you handle it correctly.
4. Not Thinking About Taxes
When creating your estate plan, make sure you factor in state and federal tax requirements. It’s not uncommon for these taxes to take a huge chunk out of a person’s estate after they pass away, which leaves far less for their beneficiaries.
To ensure your loved ones get as much as possible after you’re gone, talk to your lawyer about potential tax issues and heed their advice so you can plan for them accordingly.
5. Not Making Final Arrangements
A lot of people, especially those who do their estate planning early on in life, don’t take time to think about final arrangements.
Do you want to be buried or cremated? What kind of funeral service do you want to have? Nobody likes thinking about these things, but it’s still important to consider them.
Make sure you include information about final arrangements in your estate plan. You can always update them in the future if you change your mind, but it’s a good idea to put something in there now. That way, your beneficiaries know what to do to respect your wishes and honor you after you’ve passed away.
6. Not Naming Beneficiaries
One of the most important aspects of estate planning is naming beneficiaries. If you don’t identify who is going to get what, it creates a lot of confusion later for your family to sort out.
Make sure everyone you want to include is correctly named as a beneficiary when you’re creating your plan. If you change your mind about someone being a beneficiary, don’t forget to have their name removed from the plan, too
7. Keeping Plans Secret
A lot of people draw up an estate plan and then never tell anyone about it.
You don’t necessarily need to go through the plan with your beneficiaries line by line. However, they should have a general idea of how things are going to be divided and what your wishes are for the future.
If you explain to your loved ones, generally, what your estate plan entails, it helps to prevent unpleasant surprises (as well as disagreements about who gets what) after you’ve passed away.
8. Not Reviewing and Revising the Plan
Estate planning isn’t a “set it and forget it” thing.
What if someone you’ve named as a beneficiary passes away before you? You’ll need to update your estate to reflect that.
It’s important to review your plan regularly and revise it as needed. Most experts recommended revisiting the plan on your own every 3 years and meeting with an attorney every 6 years for a more thorough review.
It’s also a good idea to review the plan after any major life changes (such as a wedding, a divorce, etc.).
Avoid These Errors with Estate Planning
If you’re not careful, it’s easy to make errors with estate planning. If you keep this information in mind, though, you’ll have an easy time formulating your estate planning strategy and setting your loved ones up for the future.
Do you need more help finding an estate planning lawyer or updating your will? If so, we have lots of resources available on our site. Check out our other estate-related articles today.