If you’re making dinner or helping your kids do math homework, the last thing you want to think about is mortality.
Unfortunately, you’re not alone – 64% of Americans don’t have a will, and 27% said there was no urgent need for them to get one.
But will and estate planning are vital to ensuring that your assets and estate are handled properly after your death. To help you make sense of it, here are nine estate planning mistakes to avoid.
1. Not Having a Plan
On the top of the list? Not having any estate plan at all.
As you can guess, this is a pretty common problem. Most people don’t think they have enough assets to make a will or estate planning worth the trouble.
This is a huge mistake. If you don’t have a will or any form of estate planning, the courts will decide how to transfer your assets to a living beneficiary, a process called probate.
This can be a long process, especially if there are any complications in your estate (hint: there usually are). It’s also an expensive process, with court fees, personal representative fees, attorney fees, accounting fees, appraisal and valuation fees, bond fees, and more.
2. A DIY Estate Plan or Will
But before you get ahead of yourself, a DIY estate plan or will isn’t any better than having no will at all.
Sure, there are plenty of websites that will give you DIY forms, and some of those forms may be correct. But unless you know how to fill them out and file them correctly, or even what forms you need, they won’t be sufficient as a will, power of attorney, or other vital documents.
Which means your assets wind up back in probate, and you’re in just as much of a mess as you would have been with no plan at all.
3. Not Understanding How Assets Pass On
Pop quiz: all of your assets pass through your will, right?
Because most people hold most of their wealth in life insurance policies or retirement funds, most assets cannot pass through a will.
Real estate, on the other hand, can pass through wills, which is good news because the house is the most valuable thing most people own outside of a retirement fund.
If you don’t know anything about how your assets pass on, guess what? Your assets will land back in probate court after your death.
4. Not Handling or Reviewing Paperwork
On a related note, failure to properly handle or review the relevant estate planning paperwork is another huge issue that most people encounter.
Let’s say you named your sister as the beneficiary of your life insurance and retirement while you were single. That’s all fine and good.
Now let’s say that you got married. You changed your will and assumed everything would be fine.
Here’s the problem: if you didn’t change beneficiary designations on your life insurance and retirement, your sister will receive most of your estate, not your spouse.
5. Not Planning for Disability
In much the same way that people don’t like to think about their mortality, they also don’t like to think about the possibility of future disability.
That’s a big problem for estate planning.
If you don’t have anything like a living trust set up in the event that you are unable to make decisions for yourself, major decisions like managing your finances, raising your children, or healthcare decisions on your behalf are left out of your control.
6. Not Funding Your Trust
And speaking of trusts, not funding your trust is another estate planning sin that many people are guilty of.
It’s a good first step to have a trust. But a trust is like a suitcase. If you don’t put anything in it, you’re passing an empty suitcase to your beneficiaries and leaving the rest up to chance.
In other words, trusts are only as good as what you do with them. If you do nothing, well, they aren’t going to do you very much good.
7. Planning Your Estate Around Specific Assets
There’s been a lot of talk about assets going on here, which means you may be tempted to try estate planning based on certain specific assets.
Unless there is an unusually compelling reason for a specific asset to go to a specific person, resist the temptation.
For example, let’s say you have three children, and you want them to share your assets equally. One receives half your home, another is added as the beneficiary of your life insurance, and the third is added as a signer on your bank account.
That’s all fine assuming that nothing changes between now and when you die. But if you, say, sold the house or let the life insurance lapse, whatever child was supposed to receive those assets will get nothing.
8. Beneficiary Designations and Joint Accounts
On that note, let’s talk about beneficiary designations and joint accounts.
Beneficiary designations are useful, especially when it comes to life insurance and retirement funds.
The problem is that some beneficiary designations can override your will. Remember, your will doesn’t control retirement accounts or jointly owned accounts, which means that you may be leaving a sticky situation behind for your beneficiaries to sort out.
9. Keeping Secrets from Your Estate Planner
Finally, the greatest mistake in estate planning: even if you do everything else right, keeping secrets from your estate planner can throw off your best-laid plans.
Keeping secrets from your estate planner, or only providing them with vague or incomplete details regarding your finances and family, is like lying to your lawyer. You can do it for the sake of your dignity, but you’re the one who will be hurt in the long run.
The whole point of an estate planner is to provide you with an appropriate strategy to protect your family after your death. It’s difficult for them to do that if they don’t have an accurate picture of your situation.
Making Sense of Will and Estate Planning
With all of this in mind, one of the best things you can do in terms of your will and estate planning is to have a professional on your side.
Rhodes Law Firm PC offers estate planning in Augusta and Aiken, whatever your needs may be.