Avoid These 5 Mistakes When Planning Your Estate
Avoid These 5 Mistakes When Planning Your Estate
While having an estate plan in place is essential, flawed plans create significant problems for heirs. Numerous issues are common and place the entire plan in jeopardy. Here are five common issues estate planning experts identify and help clients resolve.
1.) Estate Plans Include Significant Errors or Outdated Information
While most estate plans are relatively well-designed, others leave significant room for improvement. In many instances, major life events are ignored, including births, deaths, and divorces. Whenever an estate owner experiences significant life events, their estate plan should be updated to reflect those changes. If questions related to an estate plan arise, contact an
estate planning attorney in Cullman for advice.
One common issue that’s frequently ignored is a change in an estate owner’s financial circumstances. Significant increases or decreases in assets require revisiting an estate plan to alter any amounts mentioned. In addition, addressing tax ramifications related to those changes minimizes the potential for excessive liabilities. An estate planning attorney’s advice is a must to protect the plan’s assets.
Anytime estate laws change, reviewing an estate plan for compliance is crucial. Failing to do so frequently leads to multiple problems later. While most estate planning attorneys stay on top of the laws impacting their clients, estate owners are always encouraged to ask questions if they note changes in relevant estate laws.
2.) Excluding Assets from the Plan
Most people consider all assets when creating an estate plan, but circumstances may lead to omissions. This is another area where reviewing a plan uncovers inconsistencies or issues with previously unidentified assets. For example, cryptocurrencies are increasingly common, and they should be included in an estate plan. Since cryptocurrency values are volatile, estate owners may find updating their plan frequently is a must if the value of the currency changes and distribution requirements require revising.
Another asset that’s commonly omitted from estate plans is retirement accounts. Experts recommend estate plans include asset distributions that comply with retirement account requirements. That includes designating the proper beneficiaries to protect the assets and distribute them to the correct individuals.
3.) Not Having All Necessary Documentation in Place
Estate planning attorneys routinely walk clients through the planning process to ensure all necessary documents are created and in place. Significant documents included in estate plans include a valid will, healthcare directives, a power of attorney, and any trust documents. Different circumstances dictate the need for other specific documents, which is why having an estate planning attorney is crucial.
Estate planning attorneys often recommend trusts to protect assets, but choosing the correct type of trust is crucial to protect the assets and prevent litigation later. Trusts help estate owners avoid probate court, which is always an advantage, as the expenses and timeframes involved create multiple issues for heirs. Trusts are crucial estate planning documents, and all details (including a
proper name for the trust) must be included.
Remember that there are a couple of disadvantages to trusts to consider. The first is that trusts require extra steps to protect the assets and ensure they’re distributed to the correct heirs. Estate attorneys work with clients to transfer assets are transferred to the trust correctly. The second disadvantage is that retaining accurate paperwork is a must. For example, anytime assets are transferred into or out of a trust, documenting the changes carefully is an absolute necessity.
4.) Failing to Plan for Evolving Asset Distribution Scenarios
Life isn’t always simple, which means estate owners are always encouraged to consider various ways their asset distribution plans could go off the rails. In some instances, an heir may die before the estate owner. That means estates without alternative distribution options could see assets going to unintended recipients.
In another scenario, multiple recipients could perish in a common accident, which would leave some plans in total disarray. An estate planning attorney would identify potential issues and suggest remedies to reduce the odds of problems developing if multiple heirs were gone.
Finally, what happens if a minor heir inherits assets? Who would control them? At what age would the minor gain control of the assets? Those types of contingencies are covered in a well-designed estate plan.
5.) Neglecting to Inform Heirs About the Estate Plan
Estate planning is complex, which means not everyone understands all the nuances involved. That’s why estate planning attorneys encourage their clients to
review their estate plan with heirs so everyone is on the same page and understands the estate plan’s intent. That doesn’t mean every heir needs to review the documentation or know all the details included, but it does mean everyone involved is aware of the plan and its basic outline.
Instructions that include requirements for accessing various accounts are a must to avoid long waits for authorization. For example, safe deposit box owners should ensure an heir has access to the contents without having to go through probate first. When multiple accounts are included in the estate plan, work with an attorney to decide who should have access. Again, note that alternatives should be included in the estate plan so that accessing important documents and belongings is possible even if the primary designee is no longer available.
Start Planning for the Future Now
If you don’t currently have an estate plan in place, now is the time to contact an estate planning attorney to begin the process. No one knows what tomorrow will bring, and dying without a plan creates numerous problems for heirs. Take the time now to start listing assets and who should receive them. Waiting is not a good idea.
Additionally, if an estate plan is already in place, is it up to date and accurate? Estate planning is not a one-time event, as situations change. That means reviewing an existing estate plan whenever changes occur is crucial. Even if an estate owner isn’t aware of issues, an estate planning attorney should review the documentation to spot potential issues and develop a strategy to resolve them. Lives change, so take the time to ensure an estate plan reflects your current needs and situation.
