Many people believe the word “estate” only applies to wealthy individuals with multiple properties and substantial assets, but this is inaccurate. Anyone who has money, property, or other assets has an estate and will benefit from a well-organized estate plan.
A solid estate plan can help communicate your end-of-life wishes if you are unable to speak for yourself and ensure your assets are transferred to your loved ones according to your wishes after you die. However, common pitfalls can jeopardize your estate and make settling your estate more difficult for your loved ones.
Not Planning in Advance
The biggest mistake you can make in estate planning is to fail to have a plan. It can be a costly mistake. Working with a knowledgeable lawyer to draft an estate plan long before you need it is the best way to protect your assets and make clear your wishes.
The advantages of creating your estate plan in advance include:
- Avoiding probate issues – Probate is the legal process of validating a will and distributing assets to creditors and beneficiaries. A good estate plan makes the probate process go more smoothly or in some cases can avoid it entirely.
- Reducing tax burdens – A strategic plan can minimize or eliminate estate taxes for you and your beneficiaries.
- Avoiding family drama – Putting in writing what you wish to happen to your assets after your death and who will make decisions for you if you are incapacitated can significantly reduce family tensions.
- Protecting beneficiaries – If any of your beneficiaries are minors or adults who require assistance with responsible money management, your estate plan can designate certain protections to ensure your assets are utilized properly.
Not Knowing Your Options
Some people mistakenly assume that a will is all that is needed to cross “estate planning” off the to-do list.
An estate plan may contain most if not all of the following documents:
- A will – In your will, you can specify who you want as the executor overseeing your estate. You also designate who you want to have guardianship of your dependents, and who should receive your assets after you die.
- Power of attorney – A power of attorney document designates a person who can make financial, legal, and business decisions on your behalf if you are incapable of doing so.
- A medical power of attorney – A medical power of attorney designates a person who you wish to make medical decisions on your behalf if you are unable to speak for yourself.
- A living will – Your living will is a document that specifies your wishes for end-of-life scenarios, such as whether you want to receive artificial life support.
- A trust – Trusts provide protection of your assets and reduce administrative and tax burdens for your beneficiaries. There are different types of trusts, including living trusts, revocable trusts, and irrevocable trusts to accommodate a variety of circumstances.
Not Working with an Estate Planning Attorney
Establishing an estate plan is an unfamiliar, complicated process for most of us. However, estate planning attorneys deal with estate issues and tax laws every day. The founding attorneys of Brady Cobin Law Group are Board Certified Specialists in estate law.
Our attorneys can help you in many ways, including:
- Helping you choose and designate your executor and beneficiaries
- Establishing a durable power of attorney and medical power of attorney
- Looking for ways to reduce your estate tax burden
- Setting up your estate plan in a way that helps your beneficiaries avoid probate
- Establishing a trust that can protect your assets during your lifetime
- Establishing a trust that protects your beneficiaries after you die
Not Updating Your Estate Plan Regularly
An estate plan is not a “one and done” kind of document. Even the most solid estate plan will need to be updated to address significant changes in your life and family.
Most financial planning experts suggest updating your estate plan at least once every three to five years and after any significant life event occurs.
Common life events that call for an update to your estate plan include:
- Changes in marital status
- The birth or adoption of a new child or grandchild
- The death of a beneficiary or dependent
- Obtaining additional assets or money from an inheritance
- Purchasing real estate or other valuable assets
- Opening a new business
- Moving to a new state
- The introduction of new tax laws
- A significant increase or decrease in the value of your assets or debts
Leaving Your Inheritance to Minors
For many parents, handing assets down to children is the most important reason for creating an estate plan. However, leaving money directly to minor children without designating a trustee or guardian can be a recipe for confusion.
Inheritance laws for minors prevent them from inheriting money directly. You can place your assets in a trust and designate that the assets are to be conveyed to your children when they reach a certain age and are more mature and are better equipped to handle money responsibly.
Probate courts appoint “property guardians” to manage assets on their behalf. The court will appoint a surviving parent after one parent dies in many cases, but this is not always true. The best way to ensure your children receive their rightful inheritance is to designate a preferred property guardian when you create your will.
Overlooking Personal Assets
Estate planning involves looking at the big picture. It’s easy for certain assets and details to get overlooked.
When you create an estate plan, don’t forget to take into account the following:
- Any cash stored in your home
- Real estate properties, even if a spouse’s name is also included on the title
- Life insurance policies, which your beneficiaries might not know about unless you include them in your estate plan
- Jewelry, artwork, and other valuables, which you can decide in advance to leave to specific individuals or institutions
Contact Our Estate Planning Law Firm Today
At the Brady Cobin Law Group, our team exclusively handles estate planning and elder law, so you can rest assured our focus is on quality, not quantity.
To learn more about how we can guide you through the estate planning process, call us today at (919) 782-3500 or contact us online for a free initial case review.