Most people do not like to think about their eventual demise, and they certainly don’t like asking uneasy questions about estate planning.
In fact, 6 in 10 adults in the United States do not have a will or living trust.
And that is a problem, considering how many people want their assets to pass on to their loved ones after their death.
Here are some of the most common estate planning mistakes to avoid, and how an estate planning attorney can help you figure out the details.
Not Understanding How Your Assets Will Pass
One of the most common mistakes that people make is not properly understanding how their assets will pass after their death.
Many people believe that all of their assets can be passed through a last will and testament. But that is not true.
Certain assets cannot pass through your will at all, such as non-probate assets. These include:
- Jointly-owned assets with rights of survivorship
- Life insurance policies with a named beneficiary
- Annuity contracts with a named beneficiary
- Bank accounts with a payable-on-death beneficiary named
- IRAs and other investment accounts for retirement
- Accounts or property titled in the name of a trust
If an asset cannot pass through your will and there is no alternate plan in place, then it will have to go through probate court after your death–and in many cases, the cost of negotiating through probate court is higher than the value of the asset itself.
Blunders with Your Beneficiaries
The next most common mistake in estate planning is errors associated with beneficiaries.
We could write a whole article about beneficiaries, but we have narrowed it down to two main problem areas: disabled loved ones and the so-called “problem child”.
The Disabled Loved One
If you have a disabled beneficiary, it is generally wise to work directly with an estate planning attorney to make plans for them.
Your goal here is twofold: you want to leave them an inheritance to protect them, but you also want to ensure that they still qualify for public assistance.
To be clear: if you leave them an inheritance outright, they may be disqualified from receiving public assistance until they spend the inheritance down to the statutory limit.
The Problem Child
The other side of the equation is the problem child.
Ask yourself: realistically, how will your beneficiaries manage your assets after your death? Are they smart with money? Or do they waste it foolishly?
If your beneficiaries tend to burn through money, that will help give you a sense of how the inheritance will be spent after you are gone, and whether there will be anything left to send your grandchildren to college.
Do not cross your fingers and hope for the best. If you want to leave assets to a beneficiary you know has problems, work with an attorney to develop a plan that can protect those assets from bad spending habits, creditors, or even divorcing spouses.
Having No Plan At All
But the biggest mistake of all? Having no estate plan whatsoever.
You might think that your life and finances are relatively straightforward. And if your assets are minimal and straightforward, then it is fine for you not to have an estate plan.
Unfortunately, “simple and minimal” is not a phrase that applies to most people’s assets and finances.
If you have any kind of outstanding debt, any property, and more than one person left behind when you die, then the fact is that you need an estate plan.
We get it. You do not like the prospect of dealing with end-of-life issues. But your family will be worse off if you die without any plan in place.
Avoid These Estate Planning Errors
There are a lot of common misconceptions about planning for the future. But you do not need to let them hold you back.
The key is having a plan. That is where we come in–we are experienced family estate planning attorneys that know how to help parents protect their most precious assets.
If you need help developing a plan, do not hesitate to get in touch today.