Three Big Estate Planning Mistakes to Avoid

An estate plan allows you to determine who will receive your assets in the event of your death. Although many people think that an estate plan is only for the rich, everyone can benefit from it. For the first time since 2020, the number of Americans who have a will has declined.

Why do so many choose not to create one? Almost 40% of people don’t believe they have enough wealth to leave someone. But no matter how wealthy you are, you need the will to protect your loved ones.

While an estate plan is important, it can be a difficult document to create, leading to potential mistakes that could cost you or your loved ones a lot of money. Estate planning mistakes can drastically impact the financial legacy you want to leave behind. Here are some of the big ones:

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1. No estate plan in place

The first and perhaps biggest mistake you can make when it comes to estate planning is not doing it. After your death, those closest to you will have to endure the shock and grief, and you don’t want to burden them with additional financial problems. Having an estate plan in place can give you peace of mind and provide clear guidelines for handling your affairs.

If creating an estate plan is on your to-do list, don’t delay! Many people think they have enough time to create a project like this – someone who is 35 years old might think they have decades to get things in order, but a delay can pose additional risk Represent your family. The truth is, no matter how old you are, anything can happen. If you die and still have young children, who will be their legal guardian? Without a will or estate plan, you are putting your children’s future at risk. What happens if you die unexpectedly? Or what happens if you become incapacitated and no one is given the responsibility to make medical decisions on your behalf?

None of us want to think about our mortality, but putting off your estate plan could cause even more headaches for your loved ones.

2. Don’t ask for help with your estate plan

Another common mistake in estate planning, in my opinion, is that people try to do everything themselves. Estate plans that contain errors can cause many complications after your death. No matter the size of your estate, there are still assets that you must pass on to your family.

Working with a professional, such as a financial advisor, who has the skills to create and manage estate plans can help avoid these mistakes. An advisor can advise you on what documents you need in your plan, such as: B. Wills, powers of attorney and health care instructions.

A financial advisor can help you take inventory of your assets and help ensure they go to the right person. Your advisor can help you review all of your different retirement accounts and determine the exact amount you want to give to each of your beneficiaries.

3. Forget to update your estate plan regularly

Creating an estate plan is an important step, but it’s not something you can just set and forget. Many events in life require a renewed look. Maybe you were divorced years ago, but your living will still lists your ex-spouse as the person responsible for making health care decisions.

What if you got married again after your divorce? Have you changed the beneficiary of your 401(k) to your new spouse? You don’t want to die and get your current spouse involved in legal battles with your ex.

As a rule of thumb, if you divorce or remarry, anything in your plan that includes a beneficiary designation must be reviewed or changed.

It’s not just a major life event like a divorce that may require changes to your estate planning. Failure to review and revise your estate plan after the birth of a child, the death of your primary beneficiary, starting a new business, or purchasing a home can have serious consequences, potentially resulting in your assets being distributed to the wrong person.

Ultimately, no matter how rich you are or how many assets you have, you need an estate plan. If you’re one of the many Americans who doesn’t yet have one, now is the time to get one. A financial advisor can help you create a plan to ensure your assets are distributed appropriately and provide for your family.

This article was written by and represents the views of our contributing consultant, not those of Kiplinger’s editorial team. You can check the consultant documents with the SEC or with FINRA.

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