The biggest mistake you can make when planning your estate is to not have a plan at all. No matter what your age or financial status, it’s a good idea to have a plan in place — if for nothing other than to make sure that your family knows your final wishes regarding burial or cremation.
However, there are some other common errors that a lot of people make when developing their estate plans. These are the top ones to avoid:
Not having enough life insurance benefits
Even if you’re financially secure, your family could be thrown into some distress if you die. If your assets are frozen pending the disposition of your estate, your family will need those life insurance benefits to pay the household bills until the rest of the money is released.
Not using a trust to collect those life insurance benefits
Whether you have term life insurance or whole life, it’s wisest to have the benefits directed to an irrevocable trust. That way, your beneficiaries can use the money without worrying about the estate taxes on it.
Not having a credit shelter trust
These trusts help high-asset couples pass more wealth to their heirs through the unified credit limit. Many couples don’t think about the fact that one will die first, reducing the amount of the credit they can use for their children.
Putting everything under joint ownership
A lot of people seek to escape the perils of probate through joint ownership. Unfortunately, those joint assets can still be subject to the gift tax — which can end up depleting those assets in unexpected ways.
Forgetting to check the beneficiaries on their retirement accounts
A lot of people make designations on their accounts and then promptly forget about them. When their life circumstances change — whether the kids become adults or their spouse dies — they forget to update the designated beneficiary. That creates problems later for their heirs.
If you’re anxious to avoid making mistakes on your estate plan, start with this list and then look for any unique circumstances that apply to your situation. Keep in mind that there’s no such thing as “one size fits all” wills and estate planning!
