When it comes to estate planning, there are plenty of popular myths surrounding this process.
One of the main misconceptions about estate planning is that it’s only for wealthy people. Estate planning is something that everybody who wants to secure their loved ones needs to do.
Estate planning refers to the set of legal actions that allow people to distribute their assets after they pass away. It’s aimed at ensuring that the process of transferring property, financial assets, and other assets to one’s relatives proceeds seamlessly. However, many people fail to take this process seriously, which can later cause problems for their families.
Some estate planning mistakes are worse than others. But any error can cause additional trouble for relatives who, while grieving, have to contend with what to do if there’s no will.
What follows are five of the most common estate planning errors that people make all too often.
- Failure to Create an Estate Plan
Failing to plan is planning to fail. That’s definitely true when it comes to estate planning. Many people who fall into this trap reason that they still have a lot of time left, don’t own any property or have much money saved, or feel uncomfortable dealing with such issues.
The consequences of failing to have an estate plan can be quite harsh. The property owned by the deceased will be divided according to the laws established in that particular state — if there’s no estate plan in place to dictate what should become of the property.
Not creating an estate plan leads to the following problems:
- Delays in the settlement process
- Increased costs related to legal proceedings
- Uncertainty in terms of the designation of a guardian for children
- Additional stress for loved ones
- Conflicts among surviving relatives
With estate planning, people can specify how their property should be divided. Having an estate plan in place ensures that the family of the deceased won’t have to stress over the details of asset allocation. It makes sense to retain an estate planning attorney to help create a will that withstands any legal challenges.
- Failure to Update Estate Planning Documents
Creating an estate plan is the right thing to do. However, estate planning isn’t a one-and-done affair. Estate planning documents should be reviewed from time to time to be updated whenever there’s a major life event.
It’s recommended to revise estate planning documents after important events such as marriage, divorce, birth of children, and acquisition of substantial amounts of money.
To avoid issues, people should review their estate plans every few years or when their lives change.
- Failure to Take Care of Beneficiary Designations
Many people assume that their will controls the distribution of all assets. However, beneficiary designations often take precedence over instructions contained in a will.
It means that people should pay attention to beneficiary designations to ensure smooth property distribution. Such beneficiary designations usually refer to life insurance policies, retirement funds, payable-on-death bank accounts, and transfer-on-death investment accounts.
Reviewing beneficiary designations regularly is an important part of maintaining a comprehensive estate plan. Ensuring that these designations align with the current wishes of people creating estate plans can help prevent confusion and disappointment among loved ones.
- Choosing the Wrong People for Specific Tasks
Another important part of estate planning is related to appointing people who’ll perform certain tasks. Executors, trustees, medical proxies, financial powers of attorney, and guardians should be appointed in advance.
Unfortunately, many people choose the wrong people to perform these tasks due to various reasons. For example, they may think that their families will get offended if they aren’t chosen.
However, appointing the wrong persons can create more problems than would otherwise be the case. Therefore, it’s recommended to pay close attention to choosing the right people for different responsibilities.
- Avoiding Conversations with Family Members
Yet another common estate planning mistake is failing to discuss estate plans with loved ones. Many people are too timid about mentioning the subject. But not talking about it can lead to some additional difficulties since relatives won’t be aware of how to proceed after a passing.
In addition, talking about estate plans can help relatives understand a loved one’s intentions. These conversations are likely to be uneasy. However, they can help relieve tensions and reduce the probability of disputes among relatives in the future.
There are many estate planning mistakes that people often make. Some of them have nothing to do with the actual content of an estate plan. Still, such mistakes may cause issues that relatives have to address during the worst of times. It’s necessary, therefore, to avoid committing any missteps when pursuing estate planning.
It’s possible to avoid mistakes by taking some necessary measures beforehand. Hiring a lawyer specializing in estate planning is a good idea for people who want to get it right the first time around.
