Estate planning is one of the most crucial steps you can take to safeguard your loved ones and ensure your wishes are fulfilled after your passing. Yet, many people make costly estate planning mistakes without even realizing it. These oversights can lead to unnecessary stress, legal disputes, and financial burdens for your family.
Whether you already have a plan in place or you’re just starting, understanding the most common estate planning mistakes can help you avoid them. From outdated documents to overlooked healthcare directives, each misstep can have serious consequences. If you are preparing to create an estate plan, keep reading to learn more about the most common estate planning mistakes to ensure you avoid making them yourself.
1. Not Updating Your Estate Plan
One of the most common estate planning mistakes is creating your plan and then forgetting to update it. Your life changes; you get married, divorced, give birth, or lose a loved one, and all of these changes can make parts of your plan outdated. If your plan doesn’t reflect your current situation, it might not carry out your wishes as intended. To avoid this mistake, it’s essential to regularly review your plan at least once every three to five years, or following any major life changes. Regular plan reviews and updates ensure your plan is accurate and effective.
2. The Plan is Underutilized
Some people go through the significant effort of creating an estate plan but never fully utilize it. This could mean not titling assets correctly, not sharing important documents with loved ones, or failing to use tools like trusts to their full advantage. An underutilized estate plan is almost as risky as having no plan at all. If you want to avoid this incredibly common estate planning mistake, it is essential that you work with your attorney and financial advisor to ensure you are using it to its fullest potential.
3. You Only Named One Beneficiary
Naming one beneficiary when creating your estate plan may initially sound like the simplest solution, but it can be risky. If that person passes away before you or is unable to inhibit, your assets could be tied up in the probate process for quite some time. This process may also result in your assets being distributed in ways you didn’t intend. To prevent this estate planning mistake, always name at least one contingent beneficiary for each account or policy. This added beneficiary provides a backup plan, ensuring your assets are distributed as you intend.
4. Healthcare Directives aren’t Considered
When you think about an estate plan, you probably think about securing your financial assets. However, these plans are also a great way to ensure your healthcare wishes are followed. Many people forget to include a living will or healthcare power of attorney, leaving their loved ones uncertain about what to do if they are unable to make decisions for themselves. Including healthcare directives in your estate plan ensures your preferences are respected and relieves your family from making difficult choices during high-stress periods.
5. Improperly Funding Your Trust
If you’ve decided that a trust is right for your upcoming estate plan, it is not enough to simply create it. You should also fund it. This means transferring ownership of your assets into the trust’s name. Failing to do so is a surprisingly common estate planning mistake that can render your trust ineffective. When you decide to include a trust in your estate plan, work closely with your attorney to ensure every asset meant for the trust is properly titled and documented.
6. Forgetting About Potential Taxes
Your estate, inheritance, and capital gains taxes can take a far more significant portion of your assets than you realize, which can be incredibly overwhelming if not properly planned for. Many people will overlook tax implications when creating their estate plan, which can leave heirs with a smaller inheritance than they expect and far more work to do than they have the emotional capacity for. A well-designed estate plan will factor in potential taxes and utilize strategies, such as charitable giving or trusts, to help minimize their impact.
7. No Estate Plan is Written
The biggest estate planning mistake an individual can make is choosing not to create a plan at all. Without an estate plan in place, state laws will determine how your assets are distributed, which may not align with your wishes. This can also lead to delays, legal battles, and unnecessary expenses for your loved ones. Even a simple will is better than nothing. While you might think you’re too young to consider starting this process, take the time to put your wishes into writing to protect your family from having to make these difficult decisions.
Avoid Estate Planning Mistakes by Working with Bishop Estate Law
The easiest way to avoid making estate planning mistakes is by working with an experienced estate planning attorney. They can help you make the right decisions for you and your loved ones, ensuring your legacy is protected. If you’re looking for a reliable estate planning attorney in Northern Utah, turn to our team at Bishop Estate Law.
Our team has years of experience helping individuals and families create an estate plan that fits their wants and needs. In addition to assisting individuals in creating a new estate plan, we can also review your existing plan to ensure you’re avoiding making some of these common estate planning mistakes.
If you would like to learn more about our estate planning services, don’t hesitate to contact our office today.