Estate planning is one of those things that a lot of people don’t want to think about, but ultimately taking that approach can cause problems for you, as well as your family. Estate planning in the general sense involves managing your assets in a way that plans for something happening to you. Along with planning for what happens if you die, it can also mean you’re incapacitated, maybe even temporarily.
The goal of a good estate plan is to come up with ways that your assets will be preserved, even during your life, and also how they’ll be managed and distributed after you die.
Regarding incapacitation, an estate plan can account for how your assets and obligations will be handled during this time.
Some of the assets that are often included in an estate plan are houses, cars, pensions, debt, art and other heirlooms and physical belongings, and life insurance policies.
The following are some of the most commonly made mistakes when it comes to estate planning.
Not Believing You Have Assets
“No matter how small or substantial your personal holdings are, the fact remains that they are yours,” writes Toby Mathis, founding partner of Anderson Law Group.
So often people make the mistake of believing estate planning is for rich people, and this isn’t the case. It’s something everyone should do, but even more so if you have a family. People tend not to consider things like their investment accounts, their home, and even their car as assets, but they are. All of those assets will ultimately need to be distributed if you pass away.
It’s not even just deciding how to distribute assets that’s important. There’s also the potential that if you don’t manage your assets in an estate plan, you could end up passing on a tax burden to your loved ones.
Thinking You’re Young and Don’t Need An Estate Plan
Not believing you have the assets to justify an estate plan, or thinking estate plans are only for rich people can sometimes go hand-in-hand with this next mistake.
You may think because you’re young you don’t need an estate plan, but you never know what can happen in life so it’s important to make this kind of plan no matter how old you are.
Not Using Payable On Death Accounts When Possible
Even when you have an estate plan, the probate process can become expensive and time-consuming. Whenever possible, you might want to consider the use of Payable on Death (POD) or Transfer on Death (TOD) accounts. These are account options that let you give your assets to your beneficiary upon your death without them going through probate.
Some of the accounts that likely have this option include checking, savings, money markets, and CD accounts. There are also some investment accounts that might allow for this.
Your family can save a significant amount of time and money on administrative costs with the use of these accounts.
Not Telling Your Family About Your Estate Plans
You may find that even if you have an estate plan in place, it’s difficult to talk to your family about it. Unfortunately, if something does happen to you, it can be difficult for them to know where to begin.
When you have an estate plan you should go over it in detail at least with your spouse. You want them to be able to know where to find the necessary documents, and what your plans are. This can save them the extra time and money that can go toward trying to find some of these things out.
Some people also create a checklist of all their assets, accounts and everything else there loved ones might need if something happens to them.
Finally, do keep in mind that your estate plan can always be changed or adjusted as necessary. If you create a plan when you’re young, it’s very likely that it’s going to change over time and you can make the necessary changes in your plan to reflect the current state of your life.
There may also be changes in state and federal tax laws that could alter your estate planning, so keep that in mind as well.
If you work with professionals, you can make sure changes are made as necessary and as you do make those changes, let your potential surviving family members know what they are.