Creating an estate plan is one of the most important things you will do during your lifetime. By creating an estate plan, you will determine how you would like your assets to be passed on, and to whom you would like to have those assets. Below, we will walk through some of the most common mistakes you could make regarding estate planning.
Mistake #1: Not Having an Estate Plan at All
While this may sound simple or obvious, the number one mistake you can make in regard to estate planning is not having an estate plan. If you do not have an estate plan, once you pass away, the court system will determine who gets any of your assets. It’s highly likely that you’d want to avoid this scenario; instead, being able to choose who should inherit what you currently own.
Mistake #2: Forgetting to Update Your Estate Plan
Just because you create an estate plan does not mean you should never think about it again until you’re about to pass away. Life changes, and your estate plan should be kept up to date to match those changes – whether that’s getting married, divorced, having children and so on.
Mistake #3: Not Discussing Your Estate Plan with Those Who will be Impacted
It is imperative that you discuss your estate plan with those who will be impacted by it. A good way to do this is to sit down with all of your beneficiaries and explain to each what they will receive, and what role they have.
For example, you’ll want to discuss your will with the executor you choose so that person knows who should inherit what, and that he or she is responsible for ensuring the proper distribution of those assets.
Mistake #4: Forgetting Power of Attorney
It is highly important to name a Power of Attorney, whether that is a Medical Power of Attorney, Financial Power of Attorney, or someone who will handle both your medical and financial decisions should you become unable to do so on your own).
Mistake #5: Not Planning for Incapacitation
This mistake goes hand in hand with the Power of Attorney mistake mentioned above. Simply put, many people do not plan to become incapacitated. However, while this is a situation you’d likely rather not think of, it is very important to plan for in case something were to happen to you in the future.
If you find yourself unable to make decisions for yourself, planning for the event of incapacitation will ensure that you have people you trust making those important decisions on your behalf.
Mistake #6: Having Only One Beneficiary
Naming only one beneficiary is a risk you should not take. As covered above, life can bring unexpected changes our way. To avoid this mistake, you will want to name at least one (but likely more) contingent beneficiaries – someone who will be next in line to inherit the assets should your primary beneficiary pass away before you do.
Mistake #7: Forgetting About Estate Taxes
Estate tax laws vary from state to state. For example, New York taxes your estate, while Virginia does not. Additionally, you may be subject to federal estate taxes depending on the size of your estate.
Mistake #8: Forgetting Digital Assets
With the popularity of online activity such as social media and online banking, you’ll want to account for these assets in your estate plan. Who would you want to handle your social media accounts, online bank accounts and other digital assets when you pass away?
Mistake #9: Forgetting End of Life Care
You will want to outline how you’d like to be cared for in your final days. For example, would you like to be moved to an assisted living facility or choose to receive care at home?
Mistake #10: Procrastinating
Procrastinating is unfortunately a common mistake people make when it comes to estate planning. Even if you are young and in good health, it is always a good time to create or update your estate plan.