Many Americans lack an estate plan, leaving their loved ones with potential legal and financial burdens. According to recent research, only 34% of Americans have taken the necessary steps to create an estate plan.
Even among those who have them, many plans are incomplete or outdated, putting their validity at risk. Changes in personal circumstances and laws over time can render a plan ineffective.
Without proper planning and occasional review, your wishes may not be honored, and your family could face unnecessary challenges during a difficult time.
Avoid these common errors
Creating an estate plan involves more than just drafting documents. Here are five common mistakes to avoid:
- Beneficiary conflicts and mistakes: Keep your beneficiary designations updated to avoid disputes and ensure your assets go to the right people.
- Misunderstood or underutilized plans: Make sure you understand your plan and that it accurately reflects your wishes.
- Wills that specify investments: If your will names specific investments or property, ensure you still own them, or you might burden your beneficiaries with unexpected costs tracking something that no longer exists.
- Leaving loved ones uninformed: Discuss your plan with your family so they know where to find important documents and accounts.
- Plans that don’t comply with current laws: Laws and circumstances change periodically. Failing to update your plan can lead to complications.
Other common errors include incomplete plans or those with errors, gifts that cause problems for or between heirs and tax consequences resulting from unequal ownership.
Comprehensive planning is essential
A well-rounded estate plan should include several key documents. Each serves a unique purpose in ensuring your wishes are respected. Your plan should include:
- Last will and testament: Designates how your property is distributed and who will care for your minor children
- Living will: States your health care preferences if you can’t communicate them
- Health care power of attorney: Appoints someone to make medical decisions on your behalf
- Financial power of attorney: Allows someone to manage your financial affairs if you’re unable to do so
- Living trust: Helps manage your assets to ensure a smooth transition for your beneficiaries
Working with a skilled estate planning attorney can tailor your plan to meet your specific needs. This can help to protect your assets and can ensure peace of mind for your family, reducing stress and potential conflicts.