8 Costly Estate Planning Mistakes

The goal of estate planning should be to transition your assets to your loved ones in as seamless of a manner as possible. There are mistakes that may cause you to veer of course. But they come with simple fixes. In this article, we will go over 8 costly estate planning mistakes and how to fix them.

1. Improper Funding of the Trust

A trust only helps your assets to avoid probate if they are properly titled into the name of the trust. Often people just sign their documents and fail to do this step. You will want all real property and accounts without beneficiary designations to be in the name of the trust. If you do not do this, assets will not flow through your trust and may be subject to probate.

2. Unintentional Beneficiary Designations

One of our costly estate planning mistakes is setting and forgetting your beneficiary designations. Your beneficiary designations may not line up with what your estate planning documents set out. This may lead to your assets passing to someone you did not intend them to. It is important to periodically check beneficiary designations to ensure they are in line with the rest of your estate plan.

3. Insufficient Cash

If you are making specific cash gifts to individuals or charity you will want to ensure you have the funds to cover them. Failure to do so may cause your trustee to liquidate assets, like your home, in order to fund such gifts. This may disrupt your plans if you want non-liquid assets to pass in kind to your beneficiaries.

4. Not Updating Your Estate Plan After a Divorce

Once you finalize your divorce it is important that you update your estate plan. This means removing your ex-spouse from your will and trust. As well as removing them as beneficiaries on such things as your retirement account and life insurance. Failure to take these steps could cause your ex-spouse to inherit your assets.

5. Having Outdated Documents

Laws change and your situation changes. Due to this fact, it is important that you review your estate plan every couple of years to make sure it does not need to be updated. Otherwise, you could end up leaving funds to someone you are no longer in contact with.

6. Poor Communication

It is important you set out your wishes with clear, written instructions. Just telling one child or individual your intentions could result in confusion and a potential court battle.

7. Skipping the Formal Execution

Most estate planning offices offer services where they will properly notarize and witness your documents for you. However, some people decide they want to take care of the signing themselves. But fail to execute their documents properly. This creates invalid documents that open the potential for contestation or a formal probate.

8. Drafting Your Own Will

The validity of a will is based on state law. If elements are missing or unclear because you utilized a DIY will you could subject your estate to contestation or a formal probate.

Avoiding Costly Estate Planning Mistakes

With the proper planning you can avoid making costly estate planning mistakes. It takes a little time and effort, but a seamless estate plan can be achieved. Meet with a qualified estate planner to keep your documents up to date.

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