Estate planning is often misunderstood. It's not something that only extremely wealthy people need to consider. Having an estate plan is a wise move for everyone. An estate plan not only ensures your possessions will be distributed in a way that you most want, but it can also address your needs and wishes if you ever can't make choices for yourself anymore.
An estate plan may also keep transfer taxes down, ensuring that more of your assets go to your loved ones, and it can also help you fulfill charitable giving goals. However, you need to enlist the help of professionals to create an effective estate plan. Make sure you avoid these common mistakes when making your estate plan.
Don't Choose an Executor of Your Estate Out of Obligation
Think very carefully before you choose an executor of your estate. Don't make the decision out of an obligation to a family member. Likewise, don't feel pressured into naming someone who you don't think will do a good job with the big responsibilities and privileges that come with being the executor of an estate.
Although you may feel social pressure to choose a spouse or parent as the executor of your estate, you don't have to do so. You also don't have to tell your family about your choice beforehand if you don't want to do so. Do your due diligence and be very confident that the executor of your estate is someone worthy of your trust.
Don't Leave Money to Minors
Without
Addressing Guardianship
If you leave money to minors as part of your estate plan, you need to also establish who will be in charge of handling the funds until they are legally able to accept responsibility for the money. Never include minors in your estate plan without consulting with your estate planning attorney. Guardianship arrangements need to be specific in the plan.
Don't Overlook Planning for Catastrophes
An unexpected injury or long-term disability can happen to anyone with no notice. If you don't plan for such a thing, your best interests may not be protected if a terrible situation arises where you are incapacitated. Consider how you would like your children raised if you are unable to be present for the day-to-day goings-on of their lives.
Another aspect of planning for the unexpected is addressing how you'd like your finances handled if you are alive but can no longer handle them. You need to think about who you would trust to make healthcare choices for you if you can't do so. All these complex things can be addressed within your estate plan.
Don't Assume That Your Work Is Done
An estate plan will need to be revisited over time. Don't just make the estate plan and assume your work is done.
You may need to update your plan for many reasons, such as:
- Having more children
- Changes in your assets or liabilities
- New significant relationships or the loss of significant relationships
- Changes that make your retirement plan outdated
- A move to another state
