Common Estate Planning Mistakes That You Can Avoid
The number one estate planning mistake is failing to have or to update an estate plan, says the Times Herald in the article “Top six estate planning mistakes.” Therefore, start by working with an estate planning attorney to create an estate plan, and you’ll be way ahead of most Americans. Why does this matter?
An estate plan allows you to stay in control of your assets while you are alive, provide for your loved ones and for yourself in the event you become mentally or physically incapacitated, and when you die, give what you have worked to achieve to those you wish. It costs far less to take care of all of this while you are alive. It’s a gift to those you love, who are spared a lot of stress and costs if it must be figured out after you have passed.
Once you have a plan in place, you have to keep it updated. An estate plan is like a car: it needs gas, oil changes, and regular maintenance. If your family experiences significant changes, then your estate plan needs to be reviewed. If you change jobs, have a change in your financial status, or if you receive an inheritance, it’s time for a review. When there are changes to the law, regarding taxes or non-tax matters, you’ll want to make sure your plan still works.
The second biggest mistake we make is failing to plan for retirement. If you start thinking about retirement when it is five or 10 years away, you’re probably going to be working for a long time. When you are in your twenties, it is the ideal time to start saving for retirement. Most people don’t start thinking about retirement until their thirties, and many don’t plan at all.
There are many different “rules” for how to save for retirement and how to calculate how much income you’ll need to live during retirement. However, not all of them work for every situation. Advisors are now telling Americans they need to plan for living until and past their ninetieth birthday. That means you could be living in retirement for four decades.
Mistake number three—failing to fund trusts. Trust funding is completely and correctly aligning your assets with your trust. If you don’t fund the trust, which means putting assets into the trust by retitling assets that include bank accounts, investment accounts, real estate, insurance policies and other assets, adding the trust as an additional insured to home and auto insurance policies and have every change verified, you have an incomplete estate plan. Your heirs will have to clean up the mess left behind.
Fourth, failing to communicate your estate plan to your executor, beneficiaries and heirs is a common and easily avoidable mistake. Talk with everyone who is a part of your estate plan and explain what their roles are. Speak with the person you have named as Power of Attorney and Healthcare Proxy on a regular basis. Make sure they continue to be willing and able to perform the tasks you need them to do on your behalf. Make sure they know where your documents are.
Fifth, don’t neglect to make arrangements for bills to be paid and financial matters to be handled, when you are not able to do so. There are many studies which show that after age 60, our financial abilities decrease about 1% per year. Expect to need help at some point during your later years and put a plan in place to protect yourself and your spouse. If you are the main bill-payer, make sure your spouse can take care of everything as well as you, before any emergency strikes.
Finally, talk with your successors about what you would like to happen if and when you become mentally unable to make good decisions, including caregiving options. As we age, the likelihood of needing to be in a nursing home or other care facility increases. You can’t necessarily rely on your spouse living long enough to take care of you. Make sure that your financial power of attorney contains the appropriate gifting language, your assets are titled properly, and your successor financial agents know about the plan you have created. If you don’t have a long-term care policy now, try to buy one. They are less expensive than having to pay for care.
Protect yourself, your family and your loved ones by addressing these steps. You’ll be giving yourself, your spouse and your loved ones peace of mind.
Reference: Times Herald (Dec. 14, 2018) “Top six estate planning mistakes”
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