Three Major Estate Planning Mistakes to Avoid

VaselineOctober 2, 2024

0 3 minutes read

Three Major Estate Planning Mistakes to Avoid

An estate plan helps you designate who will receive your assets in the event of your death. Despite the fact that many believe that an estate plan is only for the rich, everyone can benefit from having one. For the first time since 2020, the number of Americans who have a will has declined.

Why do so many choose not to create one? Almost 40% of people don’t think they have enough assets to leave someone. But no matter how rich you are, you need the will to protect your loved ones.

While important, an estate plan can be a difficult document to create, leading to potential mistakes that can cost you or your loved ones a lot of money. Estate planning mistakes can drastically affect the financial legacy you want to leave behind. Here are some of the big ones:

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1. Not having an estate plan

The first and perhaps biggest mistake you can make with estate planning is not doing it. After you pass, those closest to you are left to deal with the shock and grief, and you don’t want to burden them with additional financial problems. Having an estate plan in place can give them peace of mind and clear guidance for managing your affairs.

If creating an estate plan is on your to-do list, don’t delay! Many people think they have plenty of time to create one – someone who is 35 may think they have decades to get things in order, but delaying can create additional risk for your family. The truth is, no matter what your age, anything can happen. If you die and have young children, who will be their legal guardian? Without a will or estate plan, you are putting your children’s future at risk. What if you die unexpectedly? Or what if you become incapacitated and no one is designated to make medical decisions on your behalf?

None of us want to think about our mortality, but procrastinating on your estate plan could create more headaches for your loved ones.

2. Don’t ask for help with your estate plan

Another common estate planning mistake I see is when people try to do everything on their own. Estate plans that contain mistakes can cause many complications after you pass. Regardless of the size of your estate, there are still assets that need to be passed down to your family.

Working with an expert, such as a financial advisor, who has the skills to put together and manage estate plans can help avoid these mistakes. An advisor can educate you about the documents you need in your plan, such as wills, powers of attorney, and health care directives.

A financial advisor can help you inventory your assets and make sure they go to the right person. Your advisor can help you review all of your retirement accounts and designate the exact amount you want to pay to each of your beneficiaries.

3. Forgot to regularly update your estate plan

Establishing an estate plan is an important step, but you can’t just set it and forget it. Many events in life will require you to take another look at it. You may have divorced years ago, but your living will still lists your ex-spouse as the trustee to make your health care decisions.

What if you remarried after divorce? Have you changed the beneficiary of your 401(k) with your new spouse? You don’t want to die and subject your current spouse to legal battles with your ex.

The general rule is that if you divorce or remarry, everything in your plan that has a beneficiary designation must be revised or changed.

It’s not just a major life event like a divorce that can require changes to your success plan. Failure to follow through and review your succession plan after the birth of a child, the death of the primary beneficiary, the start of a new business, or the purchase of a home can have big consequences, potentially distributing your assets to the wrong person.

At the end of the day, no matter how rich you are or how many assets you have, you need to have an estate plan. If you’re among the many Americans who don’t have one, now is the time to create one. A financial advisor can help you put together a plan to make sure your assets are properly allocated and your family is taken care of.

This article was written by and represents the views of our contributing advisor, not the Kiplinger editorial staff. You can check advisor records with help dry or with FINRA.

VaselineOctober 2, 2024

0 3 minutes read

Vaseline

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