When thinking about your estate plan, it is important to create one that avoids common pitfalls and mistakes. You invest your time and money into your estate plan, so you want to be sure it works and will protect your loved ones in the event of your incapacity or death. Making sure you are aware of common estate planning oversights means that you’ll be likely to avoid them. So, what are these common mistakes? Here are the top 5 estate planning pitfalls:
Failing to plan.
The reason most people do not plan is procrastination. Whether we think we are too busy, or the cost is too expensive, the price of not planning is evident when the unexpected happens and our loved ones find themselves in either guardianship or probate court to manage or distribute our assets without our prior input. Simply put, none of us have a crystal ball. Planning for the unexpected is the best we can do for our loved ones now.
None of us have a crystal ball. Planning for the unexpected is the best we can do for our loved ones now.
Not discussing with family and friends.
It is absolutely critical you share with your executor, agent, and trustee that you have a signed estate plan and where they can find the original documents. You want your fiduciary to know your documents exist so they can use them when needed. We always encourage you to share your health care power of attorney, HIPAA release form, and living will with your agent(s) so they have a copy available to them. Whether you share more details about your estate plan is ultimately up to you.
Forgetting a power of attorney.
Both property power of attorney and health care power of attorney documents are extremely important as they allow your agent to step into your shoes during times of your incapacity. If something unexpected happens and your family needs to speak to your bank to handle your monthly bills, they will need either a valid property power of attorney or a court order appointing you as a guardian. The guardianship process is long, costly, and public. The power of attorney avoids the need for a guardianship petition.
Keeping your plan up to date is critical to a successful estate plan. Just like any investment, you want to review the terms periodically and adjust when your life circumstances change.
Not naming back-ups. Throughout your estate plan, it is important to plan for contingencies. This means that if you name person A to be your trustee, you should think about who you would want to act if person A is unwilling or unable. It is important to have a backup, so someone is available to act on your behalf if person A is incapacitated or has passed away. We always recommend having at least one backup, but it may make sense to list more in certain situations.
Not updating your estate plan. Keeping your plan up to date is critical to a successful estate plan. Just like any investment, you want to review the terms periodically and adjust when your life circumstances change or if there have been fluctuations in the law. We recommend you review your plan every 3-5 years or sooner if there have been major changes to your life, finances or health.
