Estate Planning Mistakes to Avoid
Are you among the 60 percent of Americans without an estate plan? Many believe that estate planning is for the wealthy, but this is just a common myth. The truth is, anyone with a child, home, money in the bank, or any other type of property should have at least a basic estate plan in place.
The good news is that creating an estate plan is easier than you may think, especially with the help of an experienced Bakersfield estate attorney. However, there are some estate planning mistakes you should avoid that we’ll explore below.
1. Putting Off Your Estate Plan
One of the biggest estate planning mistakes that you can make is delaying the estate plan. While it may seem morbid to think about your own death, it’s essential to plan for the inevitable. Putting the right legal protections in place will help ensure that your personal and financial affairs are handled according to your wishes.
2. Never Revising Your Plan
It’s likely that many things will change after you initially create your estate plan. You could have children, buy a property, open up a new retirement account—whatever the case may be, it’s important that your plan is regularly updated to account for these changes. Keeping your estate plan current will ensure that any new assets you acquire will go where you want them to when you die. Any of the following life events may require an update to your plan:
- Legal separation or divorce
- Birth or death of a family member
- Marriage of a beneficiary
- Move to a new state
3. Trusting the Wrong Person to Handle Your Estate
The executor of your estate plan will have a very important job—they are responsible for managing the affairs of the estate. They will handle the financial assets, using them to pay final debts and taxes, and then distribute what has been set aside for your beneficiaries. Many people choose a spouse or adult child to administer the estate, but these individuals may not be prepared to handle the duties that are required of them. You may find it better to work with someone more objective, like a trusted accountant or attorney, who has no personal claim to the estate.
4. Not Naming a Guardian
Have you considered who will care for your children in the event that you and your spouse both die before they turn 18? This is an estate planning mistake you don’t want to make. You need to put it in writing by naming a guardian in your will. Also, you will need to designate a trustee to hold any assets or property you might leave behind for your children. This person may or may not be the guardian you have selected. Many people opt to place these assets in a trust that can be used to provide for their children’s care until they reach a certain age, upon which event they would receive full access to the assets that are leftover in the trust.
5. Failing to Provide Powers of Attorney
It’s also important to detail your health care wishes in the event that you become incapacitated. You should create a financial power of attorney as well as a health care power of attorney. The person you designate in these documents will be able to act on your behalf regarding your financial and medical affairs. It’s also recommended to draft a living will, which is where you can indicate what extraordinary measures, if any, you want to be taken to prolong your life should your medical condition deteriorate beyond recovery. Without these legal protections, a loved one could be left to make these difficult decisions on your behalf.
6. Not Updating Beneficiaries
Certain assets, like retirement accounts, life insurance, and annuities, will have separate beneficiary designation forms to declare who will inherit them upon your death. Often, people don’t update their beneficiaries, so their assets will go to an ex-spouse or might exclude a child who wasn’t born at the time of account opening. Keep in mind that these beneficiency forms will usually take precedence over anything you’ve designated in your will. You should review the forms periodically and update as needed to make sure your assets go to the right people.
7. Not Funding Revocable Trusts
Revocable trusts, or “living trusts”, are designed to help beneficiaries avoid probate. This allows them to avoid lengthy court proceedings to access an estate. However, some people create the trust, have all parties sign it, but then never actually transfer any assets to the trust. This must be done during the owner’s lifetime, or the estate will be subject to the probate process. The probate process can be time-consuming and also very expensive for beneficiaries.
8. Forgetting Life Insurance
A 2018 study revealed that more than 40 percent of Americans don’t have life insurance even though most can agree that people need it. Life insurance can pay off final debts, pay for funeral costs, and provide some financial security for your loved ones. Without it, family members could be left without the finances they need for mortgages, educational costs, and other expenses. Including a life insurance policy in your estate plan can give you and your family some peace of mind.
What to Include In Your Estate Plan
Many people think that just having a will is enough. There are actually several items to consider for your estate plan. These include:
Will or Trust
These allow you to provide instructions on how to handle your estate. A will should also include guardian designations for any minor children.
Durable Power of Attorney
This document allows you to elect someone to act on your behalf regarding financial and legal matters, should you pass.
Health Care Power of Attorney
This designates an individual who can make important health care decisions for you if you become mentally incapable.
Letter of Intent: This is a letter you will leave behind to a beneficiary or the executor of your estate. It usually details funeral arrangements and other special requests.
Don’t Make Easy Estate Planning Mistakes
Estate planning can be an involved process. It helps to have a lawyer by your side to ensure you cover everything. The Law Office of Kyle W. Jones in Bakersfield offers comprehensive assistance for all of your estate planning needs. Whether you’re looking to create a will, set up a revocable trust, or other estate matters, you’ll receive personalized service.
Don’t leave your estate in the hands of just anyone. Contact our office today to set up a consultation.