Creating an estate plan can be complex. Even small mistakes can have major consequences. Hiring a professional is a great way to make sure your wishes are properly communicated. Here are some common mistakes to avoid, look at https://www.legalserviceslink.com/blog/9-common-mistakes-to-avoid-in-estate-planning/.
If you’re unsure how to proceed when it comes to your estate plan, don’t be afraid to ask for help. While there are many online resources to help you with this process, a legal professional can help you with more complicated issues. If you’re planning a large estate, a lawyer can offer tax-planning strategies and insights into recent changes in federal and state tax laws. A lawyer will also ensure that your documents are strong enough to withstand any legal challenges.
Without a will, your assets will go through probate. Probate can be a long and stressful process, and without proper estate planning, your loved ones could be left in limbo for years. However, a properly drafted estate plan can help you avoid some of the biggest problems that can arise during the probate process. Here are some of the most common mistakes that people make when planning their estates.
Powers of attorney
While most people choose their spouse to act as their power of attorney, you may want to designate another individual to act as your financial representative. While this person should be someone you trust, you should also be sure to designate someone who will act in your best interests, such as a financial planner or financial advisor. This is especially important if you own a business, as the executor of your estate will need to petition the court to be appointed as guardian, which can be costly.
Another mistake that many people make is failing to update their beneficiary designations. Though you probably won’t need to make any changes to your beneficiaries after you get divorced, failing to update the beneficiaries can completely derail your estate planning. The case of a client who remarried but failed to update beneficiary designations. As a result, the son’s bank filed a lien on other banks and found co-ownership of all of his assets.
One of the most common estate planning mistakes is failing to fund your Revocable Trust. Unlike a Will, the assets held in a Revocable Trust pass directly to the beneficiaries that you name in the beneficiary designation form. This is especially important if you or your spouse is going to live in a nursing home or other long-term care facility. While you are married, you are still considered married and should update your Will and Trust if you separate.
While establishing a revocable trust is the first step, many people forget to fund it. Without assets in the trust, the estate will go through probate, and your heirs will be left to handle the administration of the estate. To avoid this, use a financial planner or brokerage firm to retitle your accounts. Another way to fund your Revocable Trust is by creating a “pour over will,” which collects the asset from the grantor’s estate.
Naming minors as beneficiaries
Most financial accounts allow you to name a beneficiary. However, many well-meaning parents still name their minor children as beneficiaries. Although they may seem like a good idea, this mistake can lead to unintended consequences. For example, you may fail to consider that a minor cannot own assets. Consequently, financial institutions will not allow your minor child to be the new owner of your account. In this situation, you may need to appoint a conservator to receive your assets. The conservator must then hold the assets until the minor is legally of age.
It is imperative that you name a guardian for any minor children. If you die before the child reaches adulthood, you don’t want to leave them without any financial protection. Naming a guardian will ensure that your child’s finances are handled appropriately if the parent passes away. If the parents die before the child is old enough to be a beneficiary, your minor children will inherit the assets as if they were an adult.