Estate planning ensures the distribution of your assets according to your wishes after death. Common mistakes during this process can have unwanted consequences for your heirs and your property.
Understanding frequent estate planning pitfalls can help you make a plan that effectively addresses your legacy.
Waiting too long
Procrastination may be the most prevalent estate planning error. Many individuals put off the process, assuming they have ample time to address it later.
Unfortunately, life can be unpredictable. Delaying could mean that you do not have a plan in place when you need it the most.
Lack of communication
Many individuals make the mistake of keeping their estate plans a secret. Failing to discuss intentions with family members and beneficiaries can lead to confusion, disputes and potential legal challenges. Start the conversation with your loved ones even if it may be difficult to talk about at first.
Failing to update
Life is dynamic, and circumstances can change over time. Individuals often neglect to update their estate plans over the years. You should do so in response to major life events, such as marriages, divorces, births or significant financial changes. Regularly reviewing and updating the estate plan ensures it remains relevant and effective.
Ignoring digital assets
From online accounts to cryptocurrency, failing to account for digital assets can result in complications for loved ones. Approximately 14% of U.S. adults and 26% of Millennials own Bitcoin, for example. If you have digital property, add provisions for your heirs to access and manage these accounts in the future.
Lack of contingency planning
Effective estate planning involves preparing for unforeseen circumstances. Unfortunately, many individuals do not include contingency plans in their estate documents. Addressing scenarios like the incapacity of a chosen executor or the passing of a beneficiary before the testator is crucial for a comprehensive estate plan.
Sole focus on taxes
While minimizing taxes is a common estate planning objective, it should not be your only consideration. Individuals should prioritize broader goals, such as providing for their loved ones, specifying healthcare preferences and maintaining control over their assets.
By recognizing these common mistakes and taking proactive steps to address them, individuals can enhance the effectiveness of their estate planning efforts.