Having an estate plan is crucial if you hope to transfer assets in accordance with your last wishes. While estate plans are easy to create, it is also easy to make mistakes before, during, and after they have been made. Let’s take a look at a few common errors that you should avoid in your will, trust, or other estate planning documents.
Mistake 1: Forgetting to Make a Living Trust
When you talk with an estate lawyer Sacramento relies on, the first thing that he or she may mention is a living trust. This allows you to appoint a guardian for your children or grant power of attorney over your assets. Essentially, living trusts ensure that your wishes are met while you are alive if you are ever mentally incapacitated.
Mistake 2: Not Reviewing Your Beneficiary Designations
If you have gotten remarried or divorced, or if a beneficiary has died, you may need to review your beneficiary designations. Otherwise, money in a life insurance policy or a bank account may go to your former spouse instead of your child or other intended recipient.
Mistake 3: Making Mistakes When Changing a Plan Document
In the event that you need to change an estate plan document, you should do so by creating a new copy of that document. Simply making changes in pen or crossing words out won’t suffice. Making such changes may increase the odds of a challenge to your estate after your death.
Mistake 4: Not Considering Injury or Disability?
If you are injured because of another person’s negligence, this could affect your overall financial stability. It’s important to consider the possibility of not being able to work as long as you had planned. If you receive a large personal injury settlement, it’s possible that part of this settlement may be left after you pass. What happens to the money should be spelled out in your estate plan. The same is true if you win a personal injury case while alive and die before it is settled or before you receive compensation.
Mistake 5: Not Understanding Estate Taxes
Unless your estate is worth more than a certain amount (usually around $5-6 million), you won’t have to pay federal estate taxes. Even if you owe estate taxes at the state level, you may be able to avoid some or all of that tax burden by putting assets in a trust.
Mistake 6: Using Vague Language In Estate Plan Documents
If you doubt whether or not to include language in an estate plan document, do yourself a favor by putting it in. When it comes to estate planning, it is always better to include too much detail as opposed to not enough detail.
Mistake 7: Not Reviewing Your Plan Periodically
It is never a bad idea to meet with your attorney or other experts to review your estate plan every so often. Even if there have been no significant events in your life recently, you never know when an obscure tax law change or some other policy change could render a trust or other document obsolete. Reviewing your plan once every year or two should be sufficient to keep your plan in line with your final wishes.
There is never a bad time to create an estate plan. It is ideal for those with kids, those with property or anyone else who wants to make his or her final wishes known. An attorney may be able to help an individual create a plan that best meets his or her needs.
Thanks to our friends and contributors from Yee Law Group for their insight into estate planning practice.