We’ve all seen the movie scene where a family gathers in the lawyer’s office for the reading of the will. This scene, a tradition from older times, is no longer necessary or required and only serves the purpose of creating drama or a scene for television. In reality, however, although most people believe that their heirs will handle their estate with much less drama, the following mistakes can ensure that will not happen.
Having no plan.
Without an estate plan, your assets will be distributed according to state law rather than in accordance with your wishes. In such cases, probate may be time-consuming and assets may not pass to heirs as you would want. Also, taxes and fees that may have been avoided with thoughtful planning can diminish the assets intended to provide for loved ones.
DIY estate planning.
The self-reliant individual may opt to use estate planning software rather than hire a professional. For some, especially those who are single and have few assets, such planning may be sufficient. But as assets accumulate and families grow, estate planning issues often become more complex than can be accounted for with a one-size-fits-all software program. And a poorly drafted DIY estate plan can leave families with bigger problems than having no plan at all.
Unclear estate planning.
Regardless of directions given in your will, certain assets, such as retirement accounts, insurance policies, and joint tenancy property, may pass to heirs by either beneficiary designation or right of survivorship rather than through probate. To avoid causing confusion and undermining your own arrangements, make sure your total estate plan is coordinated properly.
The use of trusts as an estate planning tool may allow assets to be passed directly to heirs, saving time and expense involved in probate, as well as offering protection of those assets from creditors and lawsuits. In addition, a trust can stipulate how and when the assets are distributed, even after you have passed away.
Neglecting disability planning.
A complete estate plan will provide for the possibility of your becoming physically or mentally incapacitated in order to ensure that loved ones have a guide to your wishes and that someone you trust takes charge of your financial and physical well-being.
You should alert the people you’ve named as trustee, personal representative or guardian to the role they may need to assume. These positions often come with heavy responsibilities, and you should select people who are willing to take on the task.
Assuming your estate plan is finished.
Births, deaths, changes in marital status, moving to a new state or buying a house, and changes in the law are just some of the events that can affect your estate plan. Review your plan annually to make sure that it reflects your current wishes, at the least possible cost.
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This article is not intended to constitute legal advice, and should not be construed as a substitute for professional legal advice from a licensed attorney.