Having an estate plan in place is highly beneficial. Proper estate planning allows you to make informed decisions about the handling of your assets and gives you the opportunity to maximize the value of your estate.
With the many benefits comes the potential for making mistakes during the estate planning process. Familiarize yourself with common estate planning mistakes to avoid encountering these issues.
Not updating your beneficiaries
People commonly forget to update their insurance policies and retirement plans with the appropriate beneficiary designations. These changes align these assets with your overall estate distribution goals. Contrary to popular belief, these assets are not automatically controlled by your will or trust. If you do not include these beneficiary designation updates, the assets will not distribute as you intended.
Not updating after major life events
Always make sure to review your estate planning documents after any major life events. For example, update if you move to a new state, if you remarry, if a beneficiary you already named marries or dies and if you separate from your spouse.
Omitting a contingency plan
As you work on your estate planning documents, make sure to not only find someone who will serve under powers of attorney or as your executor or trustee, but also select people you can name as alternates. You may run into issues if you only have one person named in these roles. Failure to name a successor executor or trustee could result in the probate court determining the successor.
Forgetting to consider income tax
Some people decide to give their assets to their children before their death, not realizing that without considering income tax, they are doing their family a major disservice. Inherited property resets to the value of the property on the date of your death. This means that unrealized gains or losses disappear and your beneficiary can choose to sell the property after your death without any income tax consequences.
Avoiding these major pitfalls will bring your family peace of mind and save your estate money in the long run.