How to Avoid the Most Common Estate Planning Mistakes

Being aware of the most common estate planning mistakes can help you and your loved ones prevent unnecessary stress and expenses. Here are some of the top offenders:

Handwritten or Generic Online Wills

Handwritten wills or generic online wills create a legacy of trouble. Wills prepared without professional guidance are often considered not valid by the courts. When this happens, the state’s laws determine asset distribution, no matter what the individual might have wanted.

Outdated Wills

Relying on an outdated will could lead to serious unintended consequences, including disinheriting children, giving a surprise gift to an ex-spouse, or having your pledge to leave assets to a charity go ignored.

Issues with “Payable on Death” Accounts

Trying to avoid probate by retitling your accounts as “Payable on Death” can cause more problems. Why? If one child takes ownership, they have no legal obligation to share assets with other heirs. If the goal was to have heirs inherit equal shares and one child receives all assets, would they be balanced with other assets via trusts or through probate? What about an equitable share of the tax burden?

Lack of Incapacity Planning

Incapacity happens unexpectedly. Suppose you have prepared a financial durable power of attorney and a health care power of attorney. In that case, a named person can take over tasks like paying your bills and being involved with your healthcare decisions. Without these documents, your family will need court-ordered guardianship to be involved in healthcare decisions, manage your household and plan for whatever care is needed next. This might include making arrangements to move to a rehabilitation facility or applying to Medicaid for long-term nursing care.

Ignoring Beneficiary Designations

Failing to update beneficiary designations can lead to family fights and court battles. If your will leaves assets to your children, but the person named on an account as a beneficiary is a niece, your niece will receive the assets. The last will and testament does not override beneficiary designations or trust directions.

Misplacing Estate Planning Documents

Not telling family members where estate planning documents can be found or putting them in a safe deposit box is asking for trouble. In most states, the box is sealed upon the owner’s death. Only a court order will compel the bank to open it. If a last will includes funeral instructions, they may not be seen for weeks or months after the person is buried. Funeral directions won’t be followed if the will cannot be located promptly.

Unfunded Trusts

If a trust is created and not funded, it can’t do what it was intended to do. Trusts are great tools for many issues, such as keeping assets private, minimizing tax liabilities and establishing specific conditions for using funds. However, without funding, the entire estate plan may be undone.

Failing to Have an Estate Plan

The worst estate planning mistake is failing to have an estate plan. Many people think they need to have a certain level of assets before they need one. However, estate planning protects modest estates as much as large ones. In fact, a modest estate may benefit more. By planning to have assets transferred to the next generation, even a small wealth transfer can help secure the future of the next generation.

Conclusion

Avoiding these common estate planning mistakes can save your loved ones from unnecessary stress, legal complications and financial loss. By taking the time to create a well-thought-out estate plan, you can ensure that your assets are distributed according to your wishes and your family’s future is secure. Contact an experienced estate planning attorney today to discuss your needs and create a comprehensive plan that protects your assets and provides peace of mind. Reach out now to schedule a consultation and take the first step towards safeguarding your estate.

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