Estate planning is important but, in order for it to be effective, it needs to be done thoroughly and correctly. Unfortunately, many people make mistakes on the road to creating a comprehensive estate plan. Here are a few of the biggest estate planning mistakes and how to avoid them.
Not Having an Estate Plan at All
Going through life without an estate plan is one of the biggest mistakes you can make. Part of the reason for people failing to make an estate plan is they think they are young and strong and, therefore, don’t need one. Of course, we all know that life can change on a dime, even for those who are young and strong.
Beginning from the age of 18, having an estate plan is a good idea. From protecting what you have and what you are building to making sure the correct people are assigned to make decisions on your behalf should you be unable to, an estate plan can provide all the protections you don’t think you need but do.
Neglecting to Update Your Documents
When you make an estate plan, you shouldn’t just set it and forget it. Circumstances change, and whenever they do, it should be a signal to revisit your estate plan. Life passages suggesting an estate planning review include the following: birth, death, marriage, divorce. So does anything else that would cause you to reconsider the plans you’ve set.
Not much going on? No news is good news? In that case, set a reminder in your phone to revisit your estate planning documents every three to five years to make sure you haven’t overlooked anything in your life (a falling out with a relative or coming into some money, for example) that might cause you to change how you feel about your choices. The great thing about most aspects of any estate plan, while you are alive and not incapacitated, you are free to make changes as you see fit.
Not Choosing the Best People to Fill Estate Planning Roles
Choosing the right people to handle your affairs and make decisions on your behalf should you be unable to is just as important as deciding who gets what. Many people pick executors, trustees, or guardians without thinking through whether they are the best fit for the job. Just because you like someone or think they’re funny doesn’t mean they would be great at managing your finances or making medical decisions for you.
Family dynamics, financial responsibility, trustworthiness, and emotional readiness are each important qualities to assess when making decisions about who will assume every estate planning role. Choosing someone simply because they’re the oldest sibling, your closest relative, or your best friend in the world can lead to unnecessary problems you won’t be around to solve.
Overlooking Beneficiary Designations
Your will doesn’t control everything. For example, retirement funds and life insurance policies are often payable on death (POD). They will pass directly to the beneficiaries listed on those accounts no matter what your will says.
If you forget to update these beneficiary designations after a life change, an ex-spouse or estranged relative might receive a benefit you had no longer intended them to. Double-checking these designations is an easy way to prevent surprises.
Thinking a Will Is Enough
A will is an integral part of an estate plan and often the document that first comes to mind. However, it’s not the only estate planning document needed. Other estate planning documents besides a will include:
- A medical power of attorney
- A financial power of attorney
- A living will (advance directive)
- Revocable and/or irrevocable trusts
If you’re unsure where to start and what documents you need, talking to a Seattle estate planning attorney can help you get started on the process.
Not Planning for Incapacity
Estate planning addresses what happens after you pass away. But that’s not all an estate plan does; an estate plan covers you in case you become incapacitated and unable to make decisions for yourself.
Without a power of attorney (medical or financial) or healthcare directive, your loved ones may have to go through court proceedings to make financial or medical decisions on your behalf. This could become highly problematic if time is a factor, as it usually is when someone’s gravely ill. The last thing you would want is for your family to seek judicial intervention when the clock is ticking.
Not only can this be stressful, but it can also be expensive and time-consuming when time is of the essence. Naming someone you trust to handle these matters can keep the focus on decision-making.
Believing Estate Planning Is Only for the Wealthy
One of the biggest misconceptions about estate planning is that it’s only for wealthy people or those who have accumulated a lot of assets.
In reality, estate planning is designed to protect what you do have, whether that’s a house, savings, sentimental items, or the ability to make decisions about your own care. Even a simple plan can go a long way toward offering clear instructions and comfort to your family during a difficult time. This has nothing to do with how much or little a person has.
The best estate plans are well-thought-out, up-to-date, and tailored to the estate plan owner’s individual needs. Planning when times are good can offer peace of mind that when times aren’t good, you and your loved ones will be taken care of in the way you intend.
Failing to Discuss Your Plan with Loved Ones
An estate plan is most effective when the people involved understand their roles and responsibilities. If your family is going to be blindsided by your wishes or doesn’t know where to find important documents, it can lead to confusion, stress, and even a contest later. Having a conversation about your estate plan while you can explain your intentions and the reasons underlying them can help prevent misunderstandings and make things smoother when the time comes to rely on it.
Forgetting Digital Assets
Today, much of our lives exist online — bank accounts, social media, email, and cryptocurrency, to name some of the ways. Given the privacy involved in online accounts, if you don’t include instructions on how to access and manage them and the assets you can access through these accounts, your loved ones could struggle with recovering important information. Listing your digital accounts in one place and designating someone to handle them can save your family a lot of aggravation.
Not Considering the Tax Implications
Estate and inheritance taxes can take a big bite out of what you leave behind. Without proper planning, your heirs could end up with far less than you intended. The fix: Work with an estate planning attorney to help minimize tax burdens via trusts, gifting, and other legal tools.
Find a Seattle Estate Planning Lawyer to Avoid Making Critical Mistakes With Your Estate Plan
Estate planning may not be your idea of fun, but what won’t be fun is the chaos that will occur when the day comes you or your loved ones need to rely on your estate plan and it either doesn’t exist or is flawed in some way. At Elise Buie Family Law, our team of Washington state estate planning lawyers are experienced in creating simple to complex estate plans and can help with yours. Call our Seattle office today or schedule a time to speak.
