Nobody likes to think about death. It’s one of those things where we hope if we don’t think about it, it just won’t happen. Unfortunately, this way of thinking can put you and your family at risk. Early and regular estate planning is one of the best actions to protect your family’s future. If you haven’t started estate planning, or it has been awhile since you have created your plan, it’s never too late (or early) to start. Here are 6 common estate planning mistakes.
1. You haven’t updated your beneficiaries
Estate planning is a great way to ensure your family’s financial security. But it’s important to make sure your listed beneficiaries are accurate and up-to-date. One of the biggest mistakes people make is failing to remove a beneficiary after a divorce or failing to add a beneficiary after remarriage or birth of a child. Remember, 401(k) beneficiary designations can supersede what you have in your will. Therefore, be sure to update all financial records.
2. You moved and didn’t update your estate
Different states have different estate planning laws. It’s always a good idea to sit down with an estate planning attorney after any major move. Not only do new laws apply, but you also need to update your assets. If you purchased or sold a home, this information needs to be modified in your will.
3. You don’t have a plan in place for long term disability
A sudden injury or illness can have a drastic effect on your family’s financial future. If you become incapacitated, do you have funds in place to pay for your bills? You should regularly check your insurance policies to make sure they include long-term care insurance. You also need to designate a power of attorney to make sure you have someone who can make your medical decisions in the event you can’t. This person does not have to be the same person who you choose to designate as financial power of attorney.
4. You think you’re too young for a will
If you are married and/or have kids, you need a will. While we all hope to make it to old age, a random accident can leave your surviving family members in financial and emotional disarray. Before you designate a guardian for your children, have a conversation with the potential person about what this entails and what you will provide to make sure they can handle the responsibility. This is also a good time to make sure you have enough life insurance to cover your children’s expenses in the event of your death.
5. You don’t understand your plan
Far too many people leave the estate planning up to their attorney or financial advisor and have no idea what their plan includes. It’s extremely important to be active in the estate planning process. If you don’t understand something, ask. The last thing you want to do is include something that doesn’t make sense for your family because you don’t know what it means.
6. You haven’t funded your living trust
A living trust can help your family avoid probate and have quicker access to your estate. However, it will only work if you actually fund your trust. There are two common mistakes people make here. One, is they fail to fund the trust altogether. The process is simple and your attorney can help you navigate the process. The second mistake is failing to make changes after major life events. For example, if you fund your trust with your real property and then sell your home and buy a new one, you need to refund your trust.
These are just 6 things common estate planning mistakes. It can be difficult planning for unpredictable events, but this knowledge makes doing so just a bit easier.
