What are Estate Planning Mistakes to Avoid?

Preventable problems in estate planning can undo the best planning, but understanding the estate planning process at a high level can ensure goals are achieved, explains a recent article, “How To Avoid Common Estate Planning Issues, Including Probate,” from Forbes. Probate is the court’s process of determining how assets are distributed when someone dies. Probate can be costly, time-consuming, and emotionally challenging, adding to a grieving family’s stress. Many try to avoid it when possible.

There are a number of estate planning techniques used to avoid probate.

Listing beneficiaries accurately. When an asset has a beneficiary designation, such as life insurance or certain retirement accounts, these assets pass directly to the beneficiary. Other beneficiary accounts include Transfer on Death (TOD) and Payable on Death (POD) accounts. Any time an asset has the option to name a beneficiary, be sure to name both a primary and successor beneficiary.

Create a living trust. An estate planning attorney can create a living trust, also referred to as a revocable trust. Once the trust is created, assets must be re-titled to become the property of the trust. Failing to retitle assets means the person still owns them, not the trust, which means the trust won’t work as intended.

After the estate planning attorney has created all the necessary documents, the attorney will usually provide a detailed list of instructions describing how to title and/or list beneficiaries on assets. If one asset is titled incorrectly or does not have the proper beneficiary designation, then probate, unnecessary income taxes, or estate taxes could follow.

Some folks feel overwhelmed to complete these tasks, but their attorney can walk them through the process.

Mistakes often happen as a result of changes occurring over time. For example, if retitling assets isn’t done shortly after directions are given, it’s easy to forget the details. Over time, people open new accounts, close old accounts, and purchase new assets. Any changes must be correctly titled or have the appropriate beneficiary designations for the estate plan to work as planned.

The solution is simple: pay attention to details. Create a comprehensive list of all assets, including life insurance policies. Conduct regular reviews of beneficiary designations and titles. Verify titles and beneficiary designations to be sure they align with your estate plan. Make copies of completed documents. There have been instances when beneficiary designations are correct, but the financial institution loses the instructions.

Finally, review your estate plan with an experienced estate planning attorney at least every three years. Estate and tax laws change, as do life circumstances. Even if you have property and assets correctly titled and beneficiaries properly listed, there could be unexpected estate planning issues. Ensure your estate plan will work as intended and avoid common mistakes before they occur.

Reference: Forbes (June 28, 2023) “How To Avoid Common Estate Planning Issues, Including Probate”

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