People plan on how they want their day to go, a specific career path or retirement plan. But what about their estate and assets? While most people do not like thinking about mortality, the hard truth is everyone will pass on someday and leave their estate behind.
Estate planning is the process of making it clearly known what will happen to your assets upon passing on or when you are incapacitated and unable to make crucial decisions on your own. Estate planning ensures that your assets are distributed according to your wishes — but only if you do things right. Here are three common mistakes with estate plans that everybody should avoid:
1. Not having a plan at all
One of the biggest estate planning mistakes is not having any plan at all. This means not having a trust, a will or any other estate management tool. If you die intestate, the court gets to decide how your assets are distributed based on local state laws. That can be an unnecessary drain on your assets and take a long time, and things may not be distributed according to your preferences.
2. Failing to update your plan
Circumstances change in life. As your beneficiaries and assets change, so should the content of your estate plan. Relationship changes like marriage, divorce, deaths and new additions to the family may necessitate an update to your estate plan. The same should apply when you acquire or lose assets. Failing to update your assets or beneficiaries can result in the estate ending up in probate with tax implications.
3. Failing to plan for long-term health issues or incapacitation
A will plays a crucial role in end-of-life planning. However, it is never an all-inclusive document. What happens to your assets or make crucial medical decisions if you become incapacitated or mentally ill? Including a trust in your estate will ensure that your desired trustee assumes the management of your estate right away.
Contrary to belief, an estate plan is not the reserve of the rich and famous. Having a valid estate plan in place can give you peace of mind knowing that your assets will be managed and distributed in accordance with your wishes when you are no longer around to make important decisions.