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Common Mistakes to Avoid in Estate Planning

Whenever you begin a new, unfamiliar task, you should learn everything you can about it. This means learning what you should do, but it also involves understanding what not to do.

When planning for your estate, it’s easy to fall into certain traps. In this article, we explore some of the most common missteps people make in estate planning, and we provide practical tips for avoiding them.

Failing to Regularly Review Your Plan

As life changes, so should your plan. Time will pass, and you may lose loved ones or even gain new ones. Your financial circumstances may significantly change, requiring a complete reassessment of your estate.

It is important to review that plan regularly and make adjustments. Failing to do so creates complications down the road. You must make sure that your plan aligns with your current circumstances, including changes in your assets, family dynamics, and any new laws that might affect your plan.

Ignoring Estate Planning Documents

Technically, you could write your plan out on a cocktail napkin, and that plan is legally binding. However, it probably will not hold up to scrutiny in court, and it will be easy for anyone to challenge. Too often, people try to create a plan themselves, overlooking the importance of legally sound documents.

A trust, for example, can be a powerful tool for protecting assets. It can minimize taxes and make sure your wishes are carried out after you're gone. However, there are different types of trusts available, and you must know which is best suited for your needs. You should use official documents. This includes those that are government mandated and those created by competent attorneys.

Estate planning documents like wills, living wills, and powers of attorney are critical, and you should seek legal help when creating them. A good attorney can make sure the language is sound and difficult to challenge or disqualify.

Forgetting the Impact of Taxes on Your Estate Plan

Depending on the value of your assets, federal and state estate taxes can take a significant portion of your estate. Failing to properly structure gifts and bequests can result in tax liabilities for your heirs.

To ensure that your estate plan is tax-efficient, work with an attorney who can help you understand your options and minimize the impact of taxes on your estate plan.

Failing to Appoint Someone to Manage Your Estate

No matter your plan, you should appoint a trustworthy person to manage your interests, making critical decisions when you cannot. In the event of your incapacitation, this person is your power of attorney. They play a necessary role in handling your estate according to your wishes. They can make financial decisions for you, and a healthcare directive can appoint someone to oversee your medical treatment.

If you have a will, your appointee will be your “executor.” This person will clear your debts and transfer property to its intended recipients.

A “trustee” will manage your trust according to your wishes. If your estate is large enough, it can employ a trustee full time, or it could support a board of trustees.

Neglecting to Name Guardians for Your Children

Estate planning is often so focused on money and healthcare, that it’s easy to forget the people involved.

Naming a guarding can be a difficult topic to think about, but it is an essential aspect of planning for your child’s future. If you don’t appoint someone, the state will decide who cares for your children. In the best-case scenarios, it will leave your kids with a close friend or relative, but it could also put them in potentially harmful environments with strangers.

Taking the time now to appoint a trusted and willing guardian can provide peace of mind and ensure the well-being of your children.

The Law Office of David A. Martin & Associates is here to help you plan for your estate. You can set up a free consultation with our team by calling (916) 299-3936 or contacting us online.