Estate planning is an elephant in the room. We all know we should have one, but no one wants to actually talk about it. One way to ease into these conversations is to focus on the mistakes other people have made and come up with ways to avoid the same issues for your own estate.
Break into that conversation by discussing these four of most common mistakes:
- No plan.
- No updates.
- No trusts.
Read below to elaborate on these mistakes and to find some tips on how to solve these problems while better ensuring your estate plan meets your needs.
Solve mistake #1: Put together a plan
The most common mistake, by far, is the failure to have any plan in place at all. Even a simple plan can help to better ensure your assets are transferred according to your wishes. Without this direction, state law will guide the distribution of the estate.
Once a simple plan is in place, you can take some time to consider whether or not you want to take additional steps to protect your estate. This can include using legal tools to reduce tax obligations, further ensuring you make the most of your estate.
Solve mistake #2: Update the plan and other accounts
It is also important to update the plan. A good rule of thumb is to review the plan every five years or with any major life event. Qualifying events can include the birth or death of a loved one as well as marriages or divorces within the family.
It is also important to review beneficiary designations. Beneficiary designations are tools that determine how certain accounts are distributed. This can apply to retirement accounts and bank accounts among others. Generally, the account will automatically distribute to the named individual. If you would like to change this individual, perhaps due to a divorce, you must update the document.
Solve mistake #3: Consider using trusts
Trusts are legal documents that can be structured to serve a number of purposes. One of the more commonly used trusts in estate planning is referred to as a living trust. This form of trust can help better ensure that the estate avoids the probate process.
Why would you want to avoid probate? Probate is the court process used to distribute the estate. As with any court process, information about the proceeding is generally public. Another downfall to the process is the fact that it can take a good deal of time and can be costly. Putting a living trust into place can circumvent this system and help you to keep the whole process private.