It is crucial to avoid common mistakes and pitfalls when creating an Estate Plan. You don’t want your plan to protect your loved ones to be complicated and costly. You’ll be less likely to make common estate planning mistakes if you are well-informed. This will help you to create a plan that achieves what you want and protect your legacy.
At The Black Law Company, we understand the importance of avoiding common estate planning mistakes and creating a plan that is tailored to your specific needs and goals. Our team of experienced attorneys will work with you every step of the way to ensure that your plan is comprehensive and effective. We take the time to understand your unique situation and provide personalized advice to help you navigate the legal landscape and avoid common pitfalls.
1. Failure to Plan
Forgetting your estate plan is the most important mistake you can make. It’s something that many people put off. However, failing to prioritize or ensure your estate plan is complete can lead to financial ruin for your estate, your legacy, and most importantly your loved ones.
- The Fix – If your estate plan has not been updated in five years or you have recently experienced a major life change, you should take the time to review it or get started.
2. Talking to Family and Friends Is Not a Good Idea
There are exceptions to this rule. However, it is a good idea to at least have a conversation with family and friends. It is possible to set expectations early so that there are opportunities for discussion, which could reduce the chances of any disagreement or contention after your death. You can also write the language in your estate plan to specify who may contest any of the items.
- The Fix – Make time to talk about your Estate Plan with your spouse or any other person you have named Executor/Trustee. Also, think about notifying certain people that you have included in your Will or trust.
3. Name Only One Beneficiary
This is another one of the most common estate planning mistakes. It is a good idea to have multiple beneficiaries for your assets. You will need to have a contingent beneficiary in case a beneficiary dies before you do. This person would be the next in line for your estate or any asset. In principle, more than one contingent beneficiary should be listed.
- The Fix – For every asset, account, or policy, list a primary beneficiary and one or more contingent beneficiaries.
4. Forgetting About Power of Attorney and Healthcare Representatives
It is important to name a Power of Attorney for medical and financial purposes, and/or a Healthcare Proxy. These are people who will make the decisions in your place if you become incapacitated. These roles are usually dissolved upon your death in most cases.
- The Fix – If your living will do not designate a power of attorney, or a Healthcare Proxy for you, you should have separate documents that appoint someone or persons to make financial and medical decisions on your behalf.
5. Forgetting About the Last Arrangements
This is another one of the most common estate planning mistakes. While your loved ones will grieve after your death, planning can make it easier for them to plan what they want. It is important to make sure that your wishes for end-of-life care are well known. (i.e. hospice, assisted living, etc.)
- The Fix – Think about how you would like your life remembered and the type of burial, memorial, or funeral you wish to have. Let your loved ones know what you want them to do for you. You can also include end-of-life planning documents in your Estate Plan. This ensures that your wishes are respected and alleviates stress for anyone grieving or trying to figure out what you would like.
6. Forgetting About Your Digital Assets
Digital Estate Planning may be a new concept, but it is logical in the modern technological world. Make sure you include a Digital Estate Plan. This plan will outline how you want all your digital assets handled after you die. This could include social media accounts, online banking, email accounts, and many other digital assets.
- The Fix – A Digital Estate Plan should be a part of your Estate Planning. You will need to name a Digital Executor, just like in the other sections of your plan. This person can make sure that all digital assets are properly managed.
7. Not Thinking About Charities Important to You
Even if your estate is large, it’s a good idea to donate some of your assets to charity.
- The Fix – There are many ways to leave a portion of your estate to charity. One way to ensure your wishes are fulfilled is to include the gift you wish to bestow in an Estate Plan. You can also name a charity beneficiary of assets, such as the proceeds of an investment or life insurance policy.
8. Not Thinking About Your Children’s Future
Although your intentions may be good, your instructions can come back to haunt you or your heirs. You may wish to give instructions to your guardian on how to spend assets.
Another mistake is assuming that your children will be interested in something when they might not. You might want to pass down a vacation house that has been in your family for generations. However, the condition is that each child must be married and have their own vacation home. What happens if one child doesn’t want marriage? Or perhaps he doesn’t want the responsibility of being a homeowner. These cases can result in substantial legal fees and the devaluation or loss of assets that could impact the estate’s overall size. In this instance, heirs will need to go through the courts to receive allowances.
- The Fix – It is always better to give specific instructions on how inheritances should be passed to minors. Do you want it to be based on your age? Marital status? Graduation from college? You should also be careful about how you phrase any inheritance stipulations.
9. Getting Too Specific
This is another one of the most common estate planning mistakes. When writing your estate plan, we recommend that you be as precise as possible. There is one caveat. There are some assets that you may have at one time in your life, but not necessarily in the future. Do you have stocks in your retirement plan? Real estate? Season tickets to your favorite team’s games? These are all the things you can guarantee to have for many decades.
- The Fix – Managing your Estate Plan is a great way to avoid unnecessary complications. Every three to five years, whenever you experience a major life change, review your Estate Plan and update it if necessary. You should revise your Estate Plan if you are selling a house that was included in the original Estate Plan document.
10. Funding Your Trust Incorrectly
A Trust is a great component of any Estate Plan. But it can all go sour if it’s not properly funded. It’s only half the battle to create Trust. Once it’s funded, it’s useless.
- The Fix – Follow the steps to fund your Trust and make sure you understand what you are doing. It covers everything you need to know about how to title your assets and how to get your taxpayer ID number (TIN). You also need to know how to manage your personal property and assets with titles or not.
11. Not Paying Attention to Taxes
You could be responsible for estate tax liabilities that can impact the amount you leave your beneficiaries. You should also consider how gifts may impact the individual heirs of your estate.
- The Fix – Most estate tax liabilities are not going to pose a problem. Your estate will not be subject to federal tax unless you have a large estate (at least $11.6 million per person, or $22.36m for a couple). You should keep in mind that the exclusion limit of $5 million will be restored in a few years unless an extension has been put in place. Before you create your Will or Trust, it is important to find out if your state has an estate tax.
12. Not Securing Your Estate Plan
This is another one of the most common estate planning mistakes. Even the most comprehensive Estate Plan will not be of any use if it isn’t found by your heirs. You should think twice about putting your estate plan in a safe deposit box. It can be complicated if your loved ones attempt to access it after your death. You will want to keep your Estate Planning documents safe and together.
- The Fix – Storing Estate Plans in a fireproof safe is a wonderful idea. It’s also important to inform your spouse, or another trusted friend, where it is located.
13. Not Updating Your Plan Frequently
Estate Planning isn’t a one-size-fits-all deal. It is important to keep your Estate Planning current and reflect all changes in your life. Any major life event, such as a divorce, birth, death, or any other significant life event, could trigger a need for an update.
- The Fix – It’s important to review your estate plans every three to five years, even if you have not experienced any major life events.
Protect Your Rights and Assets – Contact Us Now
At The Black Law Company, we understand the importance of protecting your assets and providing for your loved ones. That’s why our team of experienced estate planning attorneys is dedicated to helping you create a comprehensive plan that addresses all of your needs. Whether you’re a business owner, a parent, or a retiree, we’ll work with you to create a plan that ensures your assets are protected and your wishes are carried out.
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Don’t let the uncertainty of the future leave you and your loved ones unprotected, let us help you secure your assets and your loved one’s future today.