This grim topic deserves your attention. If you haven’t made plans for what will happen after you die, your loved ones will have to pick up the pieces.
Here’s the nice part about this serious subject: once you have created an estate plan, you will have a clearer understanding of what the future will hold for your heirs. You’ll know that you did the right thing, and that you didn’t just leave the ones you love to clean up a mess. That’s just one reason to have an estate plan.
If you need more reasons, here’s what happens if you don’t have a plan, as recently outlined in The San Diego Tribune’s recent article, “6 estate-planning mistakes to avoid.” Without an estate plan, everything is more stressful and expensive. Let’s look at the top six estate-planning mistakes that people need to avoid:
No Plan. Regardless of your age or financial status, it’s critical to have a basic estate plan. This includes crafting powers of attorney for both healthcare and finances and a living will.
No Discussion. Once you create your plan, tell your family. Those you’ve named to take care of you, need to know what you’ve decided and where to find your plan.
Focusing Only on Taxes. Estate planning can be much more than just about tax avoidance. There are many other reasons to create an estate plan that have nothing to do with taxes, like charitable giving, special needs planning for a family member, succession planning in the event of incapacity and planning for children of a prior marriage, to name just a few.
Leaving Assets Directly to Children. If you leave assets directly to your children or grandchildren under age 18, it can cause unintended custodian or guardianship issues. Minors can’t own legal property, so a guardian will be appointed by the court to manage the property for them, until they reach age 18. If you don’t name a guardian, the court will appoint one for you and that person may have very different ideas about how the account should be managed and invested.
Making Mistakes with Ownership and Property Titles. With many blended families, you may want to preserve assets from an inheritance as your own separate property or from a prior marriage for your children. There are many tax consequences and control issues in blended families about which you may not be aware.
Forgetting the Trust. . Many people don’t properly fund or update their trusts. An unfunded trust doesn’t do anyone any good. Assets that aren’t titled in the name of the trust don’t avoid probate.
Lastly, think of your estate plan the same way you think about taking care of your home, health or pets: they all need looking after. Every few years, or at a trigger event, like a death, birth, marriage or divorce, review the estate plan to make sure it still works.
Reference: San Diego Tribune (April 18, 2019) “6 estate-planning mistakes to avoid”