For most Americans, preparing an estate plan is not overly complicated. They meet with an estate planning attorney to discuss what the family needs, how they want to provide for the family and the attorney prepares documents. According to a post on CNBC.com, “Don’t drop the ball when planning your estate,” people who have cared for their families for decades often forget the importance of this step; it’s a way to care for loved ones even long after they’re gone.
We took a look at the list and added a few of the mistakes we see regularly, especially ones that prevent your estate plan from working the way you intend.
1. No estate plan. A 2016 survey found that 64% of American adults don’t have even a basic estate plan. About half of these people without a plan said they either didn’t need one or just hadn’t gotten around to it. Not having an estate plan often results in assets going to people other than those you intend or in a way you didn’t intend. Creating a plan and aligning assets with it ensures assets go to whom you wish in the manner you wish.
2. Not regularly reviewing your plan. The good news is that you have an estate plan; the bad news is, you haven’t reviewed it in a decade. You’re not alone. Many people think their plans are “set-it-and-forget-it” documents that never need to be changed. However, our lives change. Our assets change. We marry, divorce, adopt children, have grandkids…the list is endless. You should review your estate plan regularly to account for changes in assets, family situation or the law.
3. Not aligning, verifying or tracking assets. Most people assume that once they’ve signed their documents, they and their family are covered. However, if your assets are not titled correctly, it may not matter what your documents say. The name on an account or beneficiary designation for an IRA or insurance policy is what actually determines what happens to that asset after you pass away. If you want your assets to pass to your heirs the way you’ve outlined in your estate plan, you’ll need to ensure the title on all your assets coordinates with your estate plan.
You’ll also need to verify with your financial institutions that any changes in title have been completed correctly and track changes in your assets over time. Any time your assets change, you’ll need to go through this process. An estate planning attorney with an ongoing maintenance program can help you with ongoing alignment of assets to ensure that in the end, your estate plan works the way you intended.
4. Not filing a power of attorney now. If you want someone to be able to take care of your affairs even if you’re incapacitated, you’ll need a power of attorney (or POA). But even if you and your attorney create one before you’re in a crisis and looking to access accounts to pay bills or provide for care, some institutions still won’t accept it. Some require a POA be submitted on their own form and in other cases, you may need to work with the legal department to get your POA accepted. It might sound annoying now, but submitting these documents before a crisis prevents a lot of stress and frustration for loved ones.
5. Unrealistic ideas about your heirs. When you draft your estate plan, you should consider if your heirs are financially and emotionally able to handle the responsibility. They may not have the appropriate maturity and financial knowledge or may even have an addiction issue—any of which may be a serious problem when giving them a large sum of money. You should talk to an experienced estate planning attorney about how best to plan to minimize issues like bankruptcy, divorce or substance abuse.
It’s important to realize that when you’re creating your estate plan, you’re planning how your loved ones will be cared for after you’re gone. That’s why it’s important to work with an experienced estate planning attorney, especially one with an ongoing maintenance program. When you’re in regular communication with your attorney, you should catch any changes in assets, family situation and the law, making your estate plan more likely to work the way you intended.
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Reference: CNBC (September 13, 2016) “Don’t drop the ball when planning your estate”