Estate planning is often associated with wealth and has many assets to distribute, and this misconception leads people to not worry about this or doing it ineffectively. Estate planning essentially comprises a comprehensive plan, which contains documents that are official for the duration of your lifetime as well as other documents that become valid after your death.
Although thinking about death is something that most of us avoid doing, it is important that you come up with a plan so that you know what will happen to your assets should you become incapacitated or pass away. Having an understanding of the importance of estate planning will allow you to achieve this effectively and reduce the likelihood of errors. In this article, we will advise you of estate planning mistakes you should be wary of.
Not Having A Real Plan In Place
The keyword here is ‘real’ – even though most people have a plan in mind, this is not always thorough, and it is poorly designed. You need to carefully analyze your situation and consider every aspect of your estate so that you have a comprehensive plan and also make sure that you fully understand it. Failure to achieve this will mean that state laws and the court system will end up being the ones determining how your estate is distributed.
Having Outdated Designated Beneficiaries
When you first make a plan, it may be years before it comes into action – estate planning should happen as early as you can, rather than when you know something may happen to you soon. For this reason, it is important to review your estate plan every couple of years or every time a major change occurs in your life. Evidently, life changes and so do the people in your life – you may change your mind about who gets what, therefore reviewing the plans is imperative. It can be extremely difficult to distribute your assets to the appropriate beneficiaries if you leave the wrong names on your plan.
Taking The DIY RouteDeciding to take things into your own hands when it comes to estate planning may seem like the easier thing to do but this is one of the biggest mistakes you can make. Although this may be cheaper initially, any mistakes you make will cause serious struggle to your family and loved ones at the time of distributing your estate. In order to effectively create an estate plan, you should consult with a financial advisor or an estate planning attorney as they have the knowledge and expertise of the specific laws in the industry. It is suggested you read more here for an increased understanding of how a professional in this area can support the effective development of an estate plan. Your lack of knowledge of the law can result in a very poor plan, and later involvement of the courts.
Choosing The Wrong Executor
Another massive mistake that is very common in estate planning is choosing the wrong person to execute their plan. An executor’s responsibilities go beyond distributing your assets. Estate executors are also responsible for paying liabilities, notify creditors, alert government agencies, submit your death certificate, and take care of any other official documents as required. An executor has a lot of power over your estate planning, and the wrong person could even steal from you. An executor can essentially be anyone whom you absolutely trust, and they should also be in good health and likely to be around after your passing.
Not Planning for Incapacitation or Long Term Health Care
When putting an estate plan together, most individuals plan for the scenario where they pass away. Although death is a sure thing no one can escape, you should also consider other scenarios, for example, if you become seriously ill or injured and are incapacitated. This is something that most of us assume will not happen, although it can unexpectedly happen to any of us. Your estate plan should cover this as well so that your assets can be distributed or looked after whilst you are alive as well.
Not Considering The Impact On Your Business
If you are a business owner, it is imperative that you consider its management once you are no longer around. There will still be bills and taxes to be paid and employees to manage and take care of. If you do adequately add this to your estate plan, it may end up staying in limbo until the courts make a decision – it could be a while before this happens, and this can have a detrimental effect on your company including complete loss.
Estate planning is vital even if you believe you do not have many assets. This is the only way to appropriately distribute everything you have between the people in your life. Make sure you do this effectively and avoid some of the mistakes discussed above.