Like most things in life, estate planning is something you’re just sort of thrown into, often without the level of preparation you might like. The need for estate planning is both urgent and universal, yet many individuals are simply not very familiar with the estate planning basics—through no fault of their own. Hopefully, you’re working with a financial planner as well as an attorney to ensure that everything is in order for your family; for your legacy.
Hopefully you are also taking care to avoid some of the most common estate planning errors. A few of the major ones are highlighted here:
A surprisingly common assumption is that, unless you happen to be exceedingly wealthy, you can really leave your estate matters to the state itself, and that the state will make sure everything goes to the right people, as per your will. This may be true to an extent, but remember that if you leave everything for the state to handle then there will almost surely be a public probate process—and this can be a massive financial burden placed on your survivors. Moreover, it ensures that your estate is settled privately, not in a highly public probate process.
While some think that just creating a will is enough, others make the wrongful assumption that just creating a trust is enough. A trust is a powerful estate planning tool, but for it to have any real weight or effect the trust needs to hold money. A big mistake is not assigning certain accounts to your trust, ensuring that it’s actually funded.
One potential mistake is awarding too much money too soon. Setting up a trust to provide your kids with their full inheritance the day they turn 18 may sound good at first, but—well, how much do you really trust the financial judgment of an 18-year-old? Delaying or staggering payments may be the wiser approach.
Perhaps the most significant mistake, not just in estate planning but in all of financial planning, is failing to review and revise your plans as needed. Consider that your estate plans may leave not just money but also guardianship of your children to certain individuals—but what if those individuals have gone through major life changes since you made your estate plan, and are no longer great candidates for guardianship? It’s simply crucial to reflect on your estate plans every year or so, and to change them as needed.
There are other potential errors, besides, but these are some of the basic ones. Of course, if you’d like any guidance in sidestepping these and other estate planning errors, our team is happy to speak with you. Contact the Stonepath Wealth Management crew.