7 Deadly (But Avoidable) Estate Planning Mistakes
Getting your estate plan documents written is (more than) half the battle. But, before you shove those freshly signed, witnessed, and notarized documents in a drawer somewhere and forget about them (and by the way, don't do that!) - please be sure you aren't making one of these seven deadly estate planning mistakes - they are all totally avoidable!
MISTAKE 1: Not understanding the plan. Ideally - you will understand the plan before you sign it. If you don't - insist your estate planning attorney walk you through the documents before signing. If it's too late for that, check back in with your attorney and ask to go over the (already signed) documents. This is not only for your education but also to ensure the attorney has prepared these documents in the way you want!
MISTAKE 2: Outdated beneficiary designations. Assets with beneficiary designations (such as retirement and life insurance accounts) are not (typically) controlled by your will or trust. Beneficiary designations need to be reviewed from time-to-time (every few years, any time you change a job, any time there's a major change in your family, etc.) and updated as needed.
MISTAKE 3: Not updating asset ownership. Just like beneficiary designations, the ownership titles of assets need to be reviewed periodically and updated as needed.
MISTAKE 4: Failure to fund revocable trusts. (My personal estate planning pet peeve!) Just because a trust is created on paper doesn't mean it's been funded. If you've gone through the time and expense of having your attorney draft a revocable (living) trust for you - be sure to take the additional steps necessary to "fund" the trust. This can happen through changing ownership titles, opening (and depositing/transferring into) new bank/investment accounts, etc. If you don't do this - your trust won't serve the purpose you intended!
MISTAKE 5: Not coordinating trusts & retirement plans. There are pros and cons to naming trusts as the beneficiary to retirement (and other) accounts. While there are a number of good reasons to do this, some of the potential cons involve an increased tax burden and a delay in the ultimate distribution to your loved ones. Be sure you understand what you are doing and why, and what the outcome will be, before you do it.
MISTAKE 6: Not updating powers of attorney. Like your beneficiary designations and your asset ownership, power of attorney documents should be reviewed occasionally and updated as needed.
MISTAKE 7: Not updating the plan. The estate plan you create when you are 35 may or may not still suit your needs and goals when you're 45, 55, 65, and beyond. It's important to review the overall picture - and I recommend once every 5 years and/or if your net worth substantially changes, you have a significant change in your employment status/job (like retirement or opening/closinga business), you move out of the state or country, the composition of your family changes, etc. Additionally, the applicable state and federal laws change from time to time! Just like it's important to understand your plan when you make it, it's important to make sure it is still valid and applicable to your life down the road.
REALIZE YOU'VE MADE ONE OF THESE MISTAKES OR WANT TO BE SURE YOU AVOID ONE? Contact an estate planning attorney today. You can reach me here.