Ensuring a proper and up-to-date estate plan is vital for managing asset distribution when you have passed away. Even a tiny mistake can cause massive problems for your loved ones during the settlement process. These minor errors can be impossible to correct down the line leading to even graver problems. The good news is that you can avoid these mistakes with careful estate planning.
Check out these estate planning mistakes that can potentially ruin the peace of mind of your loved ones and yourself.
Not having an estate plan at all is the biggest mistake you can commit. It not only puts the financial future of your estate in question but it’s also disastrous for your loved ones once you pass away. If you haven’t yet started estate planning, it’s been more than five years since you updated it, or you’ve undergone a significant life event, make sure you take the time to sit down and begin the creation or review process.
People often think that their wills control how their assets will pass upon after their death.
This isn’t entirely true. Today, most asset owners either put their wealth in retirement plan accounts or life insurance plans; most of these assets pass outside the wills or trusts. Wills and trusts only control real estate and other properties. Assets such as life insurance and IRAs are subject to probate. These assets are passed on to the beneficiaries you name in the beneficiary designation form.
Although these roles dissolve when you die, it’s essential to appoint a power of attorney (healthcare and financial) to ensure your wishes are met if you become incapacitated.
You can choose one of your close family members or friends to fill these roles. Make sure they fully understand your wishes for treatments you would want to receive or not. Similarly, you can name a financial power of attorney who can act on your behalf regarding financial matters.
The notion of digital estate planning is relatively new, but since the world is turning to technology-based systems nowadays, it makes sense to allocate your digital assets carefully. A digital estate plan establishes how you would like your digital assets to be distributed once you are gone. This could include your social media handles, online banking profiles, email accounts, cryptocurrency, and other similar assets. Like other plans, you would want to appoint a digital executor to ensure all your assets are handled as you prefer.
Contingent beneficiaries receive asset ownership if the primary beneficiary passes away or declines the property. The court will declare you to have no beneficiaries if you don’t name a contingent beneficiary. It’s vital to think about and include relevant provisions in your estate plan.
You may name your spouse as the primary beneficiary of your assets, for example, and two adult children as contingent beneficiaries who are entitled to receive half of each if your spouse declines it.
You can always include provisions for charitable work you want to continue, even if you are no longer here. You can always allocate some of your assets to a charity or philanthropic work that is meaningful to you. You can name the charity as a beneficiary of assets such as investments or life insurance policies.
The executor named in your estate plan is responsible for collecting and managing your assets, assembling and assessing your credits, paying taxes and invoices, and ensuring correct asset distribution. This is a multi-step process that takes months or longer for execution and requires careful record-keeping to distribute your life assets as you wish.
Many people fail to appoint an executor with the required skillset. Some don’t perform a thorough check to ensure the executor they appoint can fulfill the responsibilities needed from the job. An efficient executor can lead away from the probate process, mishandling of the estate assets, and disgruntled heirs.
The right way is to choose an executor is with careful consideration of whom you trust to do the job in the best manner possible. It doesn’t necessarily have to be a family member; you can even hire an attorney you trust or a reliable friend.
Check out our comprehensive estate planning platform Complete Wills to avoid these mistakes and more when creating your estate plan. Our easy-to-use and intuitive web-based portal has helped hundreds of users choose the best estate planning solutions and draft them correctly with a few steps. Get started today and create a reliable plan for the future of your assets.