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8 Common Estate Planning Errors and How to Avoid Them
Proper estate planning is essential to ensure that your final wishes are carried out and that your loved ones are taken care of financially. Yet, 67% of Americans have no estate plans.
While the process is not without its challenges, it can make a difference. Several estate plan elements should be included during the estate planning process.
If you haven’t already gathered your estate planning documents, there is no time like the present. Before you get started knowing the common estate planning errors can ensure you get things done right. Here are eight errors people make when planning their estates—and how to avoid them.
1. Not Having a Will
This is one of the most common—and costly—mistakes you can make regarding estate planning. If you pass without a will, your property will be distributed according to your state’s laws of intestate succession, which may not align with your final wishes.
You can create a will yourself or consult with an experienced attorney to draft a will that reflects your final wishes. Another way to avoid this common estate planning error is to have a living will. A living will be updated and revised often to ensure your final wishes are met if you pass unexpectedly.
2. Forgetting About Final Arrangements
Another one of the most common estate planning errors is forgetting about your final arrangements. Planning a funeral or burial arrangement isn’t an easy task. Especially since your loved ones will be grieving after you pass.
Planning can be a burden lifted from those you leave behind. For example, if you want your burial to happen in a particular place or attire, you want to put this information down. Another critical component to consider is making arrangements if you have minor children.
It’s essential to name a guardian, so there’s no question about who will care for them if something happens to you. Without a named guardian, your children could end up in foster care or be placed with distant relatives you may not have even considered. Estate planning aims to tie up all loose ends so your family members won’t have to.
3. Not Updating Your Beneficiaries
Once you’ve named beneficiaries in your estate planning documents, keeping those documents up to date as your life changes is essential. For example, if you get divorced or have a child, you’ll need to update your beneficiary designations accordingly.
Otherwise, your ex-spouse or child could inherit a property you don’t want them to have. This is why having outdated beneficiaries is one of the common estate planning errors.
4. Not Having Enough Life Insurance
Many people underestimate how much life insurance they need; as a result, their loved ones will have insufficient financial resources after they pass. Make sure you consult with a financial advisor to determine how much life insurance you need so that your loved ones are taken care of financially if something happens to you.
A good rule of thumb is to decide whether you need a term life or a whole life policy. Having some level of life insurance is better than none.
5. Not Properly Titling Assets
Regarding estate planning, you want to ensure that your assets are correctly titled to avoid probate court. For example, if you have a bank account that is joint with the right of survivorship with another person, then the account will pass directly to the surviving owner outside of probate court. However, if the account is only in your name, it will go through probate court.
Also, having a qualified terminable interest property trust for your assets can be a good idea. This estate planning tool maximizes a couple’s applicable exclusion amounts while qualifying for the marital deduction.
In the event of your passing, total property interest transfers won’t trigger estate taxes or most gifts under the marital deduction.
6. Failing to Plan for Long-Term Care Needs
Nobody likes to think about it, but the reality is that many people will need some form of long-term care as they age—whether it’s in-home care, assisted living, or nursing home care. These services can be costly. Planning financially by purchasing long-term care insurance or setting aside money for these expenses is essential.
7. Neglecting Retirement Planning
Retirement planning is another crucial aspect of estate planning that is often overlooked. You should consider retirement as early as possible and begin saving for it accordingly. Otherwise, you could find yourself struggling financially in retirement.
Since many people retire when they are older, it makes sense to take care of estate planning with that in mind.
8. Avoiding Difficult Conversations
The subject of death can be tough to talk about, but it’s essential to have honest conversations with your loved ones about your final wishes sooner rather than later. These conversations will make things easier for them down the road when they might have to make tough decisions on your behalf. To avoid common estate planning errors, enlisting professional executor services is crucial. Executor Support provides expert guidance, ensuring accurate document management, timely probate procedures, and proper asset distribution, leading to a well-executed estate administration process that honors the deceased’s wishes and minimizes potential pitfalls.
You Can Avoid These Common Estate Planning Errors!
Estate planning is valuable because it ensures that your final wishes are carried out. It also gives your loved ones the chance to grieve properly without worrying about finances. That’s why avoiding common estate planning errors is essential.
You want to ensure you have a will detailing your final arrangement wishes and have beneficiaries clearly defined.
Having enough life insurance while considering your assets and long-term is critical. Finally, don’t be afraid to have the conversations that matter. If you found this article helpful and want similar content, visit our website today!
Kenneth is a proud native of sydney, born and raised there. However, he pursued his education abroad and studied in Australia. Kenneth has worked as a journalist for almost a decade, making valuable contributions to prominent publications such as Yahoo News and The Verge. Currently, he serves as a journalist for The Hear Up, where he focuses on covering climate and science news. You can reach Kenneth at [email protected].
