Estate plans give you peace of mind since they dictate to whom your assets should be transferred. If you intend to update your estate plan soon, that is a step in the right direction. However, if you are updating your estate plan for the first time, you are likely to make certain mistakes. If your estate plan is erroneous, you will not be any different from a person without an estate plan. So if you want your family members to acquire your assets without any strife, you must ensure that your estate plan is well written. Without further ado, here are ten mistakes you should avoid when updating your estate plan.
10. Updating It Only Once
One thing you need to remember is that estate planning is not a final step. Therefore, you have to continually update your estate plan based on the events taking place in your life. Some events that can push you to update your plan include the death of a family member, birth of a child, marriage, and divorce. However, you shouldn’t only update it when a major event affects your life. You should also review it regularly. According to Fidelity, you should update it every three to five years.
9. Failing to Think About Your Children’s Future
It is not uncommon for people to leave out children during estate planning. Some people leave them out because they consider them too young to acquire any property. What they fail to realize is that they will eventually become adults. When you leave your estate with your child, be sure to designate a guardian who will ensure the child gets the assets. Another mistake some people may make is assuming what their children want rather than asking them. For instance, you may pass down a vacation home to your child with the condition that they sell it after marriage. However, your child may not want to be married or become a homeowner.
8. Not Talking to Family or Friends
Talking to your family or friends about estate planning is not easy. According to Postic and Bates, one of the reasons people do not involve friends or family is the notion that they are inviting death in their lives. However, it is best that your loved ones know where to locate your will in case you die. Besides knowing where your will is, they will understand how you willed to distribute your assets.
7. Not Planning for Disability
If you do not have a family member living with any disability, you will likely not factor disability in your estate plan. However, a family member can become disabled in the future, so it is important to anticipate such a possibility. According to American Bar, 25% of people are likely to get disabled before retirement. With such high odds, you now see why you should include disability in your estate plan.
6. Naming Only One Beneficiary
Death is unpredictable. For instance, you may include your spouse as the sole beneficiary, only for them to die before you. This is rather inconvenient since you will have to modify your estate plan to include more beneficiaries. It is therefore advisable to name as many beneficiaries as possible from the onset. In case one of the beneficiaries dies, you will still have other beneficiaries in your will.
5. Forgetting to Grant the Power of Attorney to Someone
A power of attorney is a legal document that grants someone access to distribute assets on your behalf. Sometimes, there are instances when you may be unable to distribute the assets, e.g., when you become incapacitated. While incapacitated, you will be unable to discharge your duties, and that is where power of attorney comes in. So, as you plan, think of a person you would trust to manage the assets on your behalf.
4. Not Considering the Final Arrangements
Estate planning is not just about leaving your family members with money and other assets. You also need to plan for funeral arrangements. Funerals are quite expensive, and that means your family members would have to withdraw their savings to cater for your burial. To avoid making them suffer in this manner, you should include your burial arrangements in your estate plan.
3. Improperly Funding Your Trust
Having a Trust in your estate plan is important since it ensures the smooth transfer of your assets to the right people. However, if you have not been funding your trust, it will not help your family members at all. Since they will be unable to get your assets, they will fight amongst themselves. If you have never created a trust and intend to establish one, there are some factors to bear in mind. For instance, you should name your beneficiaries, title your assets correctly, sort out unnamed assets, etc.
2. Putting Your Child’s Name on the Deed to Your House
Some people put their house in their child’s name to protect it from creditors. Others do so because they think it is a safe way to transfer property. Whatever the reason for this move, it can cost you dearly. Since you have given the title to your child, the child may do whatever they want with the house. For instance, they may sell it or kick you out of the house. If you need an effective way of securing your house, it would be best to seek legal advice.
1. Not Choosing the Right Person to Handle Your Estate
If you want to pick someone to manage your estate, you may immediately pick your spouse. However, managing estates involves complex probate processes which means your spouse will get overwhelmed. Therefore, if you need to pick a person to manage your estate, consult an estate planning attorney.
Hopefully, you understand the importance of proper estate planning. We have already established the dangers of not updating estate plans correctly. If you do not know how to draft an estate plan, it would be best to first consult a lawyer. Without a lawyer, you will end up making some of the mistakes identified in this listicle. So if you love your family, you need to update your estate plan so that they can inherit your assets.
Written by Allen Lee
Read more posts by Allen Lee