Estate planning is a scary topic for many. For one, it forces us to face our own mortality, something we’d all rather avoid. Beyond that, the process is rife with legal documents, which can be intimidating.
Unfortunately, little missteps here and there can mean your carefully-laid out wishes aren’t fulfilled. This post aims to help you avoid those. Here, the top five estate planning mistakes:
- Not planning at all. According to recent research from the website Rocket Lawyer, close to two-thirds of Americans don’t have a will. Worse, 55% of those with children don’t have one. Why is that so bad? Because a will is how you designate guardians for your children if you are no longer around to care for them. Skipping out on this means that decision may be left to a court.
- Not updating your beneficiaries. The beneficiary designations on things like your retirement accounts, life insurance policies or annuities will trump the directives outlined in your will, which means keeping them up-to-date is of paramount importance. Otherwise, you may find that your ex-spouse receives your entire retirement savings, while your current one — or your children — receive nothing.
- Leaving money with strings attached. I don’t believe in this, nor do many of the estate planning experts I’ve spoken to. Gifting your children with an amount of cash on the condition that they complete a degree at a four year college, for example, generally isn’t a good idea. For one, you never know if your kid is going to be the next Mark Zuckerberg. But beyond that, these sort of contingencies get messy fast. Maybe your kid wants to go to art school, not Harvard. If you feel that there may be a scenario under which you don’t want money to be released — for instance, worries about drug or alcohol problems — you can leave money in a trust, to be distributed in chunks.
- Forgetting about material assets. That table in your dining room that was once JFK’s desk? It could be sold at a yard sale if you don’t tell anyone it’s of value. The same goes for other material assets, both valuable and sentimental. It helps to create a list of all of the items in your home that are worth passing on, noting who you’d like them to be passed to or how they should be distributed.
- Letting your plan gather dust. This sort of thing needs to be revisited at least once a year, and updated when major life changes happen, whether that means a marriage, a divorce, or the birth of a new family member. Forgetting to do that could mean your assets end up in the wrong hands, or someone is inadvertently left out.
Finally, a bonus: Not working with a good estate planning attorney — or, at the very least, having one look over your plans if you go at it alone or with the help of an online service.