Planning for your departure is one of the most difficult but important parts of aging. All your hard work can go to waste if left in the wrong hands. In cases where multiple beneficiaries are involved, your loved ones can end up at war with each other for a piece of your estate. However, proper estate planning can avoid this and other unpleasant situations.
In this piece, we’ll explore 3 mistakes that can be detrimental to your estate planning to help avoid probate cases after you’re gone.
1. Failure to update power of attorney
Power of attorney (POA) is a vital document, and its importance goes beyond estate planning. It’s important to have two powers of attorney, one for medical and one for financial decisions. In the event of your suffering from a disability that renders you unable to make or state these decisions, a designated agent is entrusted to act on your behalf and execute your wishes, whether you have a will/trust in place or not.
While death is certain, many people don’t put much thought into the possibility of needing someone to act on their behalf as they reach the end of their life. As a result, it’s easy to ignore or fail to update POAs, leaving your estate in the hands of someone you don’t trust. To avoid having your estate inherited by the wrong people, it’s crucial to keep your list of POAs up to date, especially after major life changes.
2. Failure to update the estate plan
An estate plan consists of four key elements:
- A will and or living will
- A trust
- Financial power of attorney
- Medical power of attorney
The four elements of estate planning have two concerned parties: heirs and executors/agents.
There are also parts of the estate plan that can become obsolete or change over time. For example:
- Death of an heir or an executor
- Relationship changes like marriage or divorce
- Emergence of new heirs
- Changes in property ownership
- Changes in law
Your estate plan should be updated to reflect any life changes in order to avoid conflict upon your departure or unnecessary costs associated with changes to the law. Contact your estate planner as soon as possible to inform them of your life changes to avoid leaving out heirs, or leaving property unaccounted for.
3. Failure to fund living trusts
A living trust, also known as a revocable trust, is a document that spells out a person’s assets and is not subject to probate. Many people use revocable trusts to help plan for disability and to reduce their tax liability.
When a trust is created and all parties sign it, the next step is to fund it ― a step that many estate owners forget. Funding the trust allows for a legal transfer of assets to the trust. If you fail to do so, assets will be subject to probate and won’t gain from the trust benefits. It’s important to confer with your estate planner on what is needed post-signing, to ensure the trust is funded and your estate plan is properly implemented.