Eight Common Estate Planning Mistakes

August 7, 2020

#1 Treating Estate Planning as a “Do It Yourself” Project

Many websites offer “Do-It-Yourself” kits for Estate Planning. These are tempting because of their low cost. However, this method increases the risk your estate plan will miss important information or use terms-of-art incorrectly, with disastrous results. An experienced estate planning attorney knows how to craft a plan that fits your needs and avoid costly mistakes.

#2 Not Updating Beneficiary Designations

Some assets, such as life insurance or retirement funds, are not governed by a Will or Trust. Upon your death, these assets are distributed to the beneficiaries designated under each account. Over time, the people you want to receive funds may change due to their death, the birth of children, divorce, or other personal reasons.  Reviewing your beneficiary designations after important life events will ensure your assets go to the right people.

#3 Not Updating an Estate Plan At All

Your assets change over time. Your family changes over time. Your plan should, too. Just as updating beneficiary designations is a must, reviewing and updating your estate plan periodically is necessary to ensure new assets are properly accounted for and loved ones provided for.

#4 Failing to Plan for the Worst

No one likes to think about unfortunate life events – medical problems, financial woes, etc. However, failing to consider them when writing your estate plan can cause major headaches and costs down the road. Your estate plan should consider how you want your healthcare and financial decisions handled in the event of a crisis.

#5 Choosing the Wrong Trustee

If you decide to put your assets in a Trust, choosing a responsible Trustee is vital. Select someone skillful, mindful, and trustworthy enough to properly and faithfully execute your estate plan. Additionally, when updating your estate plan, always consider whether your chosen Trustee can still serve in that capacity, or whether due to changed personal circumstances, financial troubles, or death, a new Trustee needs to be selected.

#6 Not Including Digital Assets

A newer frontier in estate planning involves handling your online assets. Many people use online banks, social media, and other accounts that are only accessible with usernames and passwords. It is vital that you provide your Trustee or Power of Attorney with access to a list of your accounts, usernames, and passwords, along with your instructions for each in order to avoid lost assets, whether they be financial or personal.

#7 Your Home: Gifting Instead of Inheriting

Parents often think that adding their child on the deed will save their child money. Unfortunately, that move can end up costing their child money. Adding your child to your property’s deed is a gift which could result in them incurring capital gains tax in the future. If you want your child to receive your real estate, transfer it though a Trust, Will, or Transfer on Death Instrument. Moreover, when a parent places a child on their home, the parent exposes the house to the creditors, lawsuits, and bankruptcies of the child.

#8 Not Planning for Family Squabbling

No one wants to imagine their children and other beneficiaries fighting over their estate. Unfortunately, familial bonds are not always strong enough to overcome financial incentive. Vague or outdated estate plans can leave crucial parts of your wishes up for debate – or worse, litigation. This situation can be aggravated by “problem children” (you know if you have them) who would put their own benefit above your wishes. Keep your family dynamic in mind and be specific and clear with your intentions when creating your estate plan.

Call our office at 773-631-9215 or email us at StrzalkaLaw@maslawoffice.com to set up an appointment to discuss your Estate Planning needs.