If you have decided to establish an estate plan, you are one step closer to providing financial stability and peace of mind to your family members and yourself. By avoiding these common estate planning errors, you can move even closer to achieving your legal and financial goals.
Choosing the wrong people
Part of creating an estate plan is selecting people to make important decisions for you in the event you are no longer able to make those decisions for yourself. These selections require careful consideration, as choosing the wrong person could result in costly problems. In selecting a power of attorney, for instance, some qualities to look for include:
- Ability to stand up to disagreement
- Proximity (someone who lives far away will be less equipped to handle your local legal and financial matters)
A person may be a great friend or beloved family member, but not be the best option for a role of such significant responsibility. By giving such authority to a trusted and capable person, you can rest assured that your wishes remain in good hands.
Failing to update the plan
If you already have an estate plan in place, you want to make sure it is still aligned with your goals. If you established your plan several years ago, it is probably worth revisiting in the event changing circumstances render your will, trust or other estate planning documents obsolete. Some life changes that often warrant a change in an estate plan include:
- Shifting sentiment and family dynamics
- A significant change in financial circumstances
Without making necessary changes, your plan could fail to fulfill your wishes while leaving your family members with questions and even legal disputes.
Missing beneficiary designations
Certain assets such as IRAs and 401(k)s allow you to name a beneficiary who will receive the account funds in the event of your death. If you have failed to name a beneficiary or failed to update your beneficiary designation, these assets could get held up in probate instead of going directly to the people you want to receive them.
Details are everything in an effective estate plan. By getting these items right and avoiding preventable mistakes, you can rest assured that your estate plan will achieve the objectives you want it to.