Common estate plan mistakes to avoid

Having a good estate plan can be critical in ensuring that your family is well taken care of after you are gone.

More people are trying to go-it-alone and create their own estate planning documents using online tools to avoid the higher cost of hiring an estate planning attorney. Having a good estate plan can be critical in ensuring that your family is well taken care of after you are gone. While the quality of online tools continues to improve at a good pace, working with an experienced estate planning attorney remains the best way to ensure assets are distributed according to your wishes and in the most tax-efficient way possible. Too often, we see those who go-it-alone make mistakes that can be costly.

Here are some estate planning mistakes to avoid:

Having an outdated estate plan and/or Will

Life changes, and your financial circumstances may change as a result. It is a good idea to review your estate plan at least once a year to keep it updated. Your estate plan should be modified accordingly if any of the following life changes occur.

  • Your parents have died and thus can no longer be beneficiaries.
  • Your children have gotten married and had children of their own.
  • You have divorced and remarried.
  • Your assets have grown (or diminished) significantly.
  • You no longer own a home, or you purchased additional property.

Relying only on joint tenancy to avoid probate

Wills only direct the transfer of certain assets at your death; many assets are transferred outside of wills. For example, assets titled in joint tenancy pass to the surviving joint tenant, not per the terms of your will. Many believe that titling property in this way avoids probate. That is not the case. Assets titled in joint tenancy only avoid probate at the first death. When the surviving spouse dies, the assets will typically end up in probate.

Not coordinating a Will and a Trust

If you have a will and a trust, be sure the documents are aligned so your wishes will ultimately be carried out. If the two documents contradict each other, that can lead to complications and potentially a lengthy and expensive court battle when it comes time to distribute assets to your heirs.

Titling assets incorrectly

You want your intentions to be carried out for all assets, including your primary residence, additional residence, bank accounts, brokerage accounts, retirement accounts and even vehicles. Designate a beneficiary (or beneficiaries) on all IRAs, employer provided retirement plans, and other qualified accounts. Confirm how other assets are titled to ensure they transfer as desired.

Not naming successor or contingent beneficiaries

What happens if your primary beneficiary predeceases you? If you do not update the beneficiary designation, there will be no successor to receive the account assets upon your death. It is important to name both primary and contingent beneficiaries on accounts. You can name multiple primary beneficiaries or list contingent beneficiaries who may receive the assets if the primary beneficiary predeceases you.

Failing to name a person to make health care decisions

Use living wills, medical directives, health care proxies, or advance health care directives to designate someone you trust to make sure your medical wishes are carried out in the event you become incapacitated. It is also important to notify the person you choose and make sure they are comfortable acting in that role.

Relying on outdated or stale financial powers of attorney

You may have selected someone to make financial decisions for you in the event you are incapacitated utilizing a power of attorney. If the relationship with this person changes, it is important to update your power of attorney, otherwise someone you may no longer trust could oversee your entire financial circumstances. Consult with an attorney about how to adjust your financial power of attorney.

Having a good estate plan is critical and some of these issues can be complex. Going it alone creates opportunities for missteps. Speak with your estate planning expert to ensure you have a proper estate plan in place so that your heirs are taken care of in the way you intend.

About the Author
Jeff Witz, CFP® welcomes readers’ questions. He can be reached at 800-883-8555 or at witz@mediqus.com.