Top Estate Planning Mistakes

You probably understand that making an estate plan is important to protect your future and your family. Like a lot of people, you may have put off estate planning despite knowing how important it is. After all, life is busy, and there are a lot of things that have to be done today. If you are reading this blog post, you are probably thinking about making an estate plan—so congratulations on taking that important step. Because we want the estate planning process to be both easy and productive for you, we are highlighting three common estate planning mistakes.

Creating a Trust — Then Neglecting to Fund It.

Living trusts have been an increasingly popular estate planning tool for several years. There’s a lot to love about a revocable living trust. It allows you to use, control, and enjoy trust assets during your life just as if they were in your own name. When you become incapacitated or die, a trustee you have chosen can seamlessly manage the trust and distribute the trust income or assets on terms you have established. No probate court involvement is necessary.

Many parents create trusts because they can prevent the need for a conservatorship if the parents die while their children are still minors. A living trust can also keep your young adult beneficiaries from getting their hands on their whole inheritance before they are prepared to manage it.

So what’s the downside of a trust? It’s that simply creating one doesn’t do anything for you. You need to put assets in the trust in order to have the protections it can provide. This process is called funding the trust.

To put real estate in the trust, you need to execute a deed from yourself to the trust. To put a bank account in the trust, you need to go to your bank and designate the trust as the owner of the account. These things are not hard to do, but they are easier with an experienced estate planning attorney to advise you.

Forgetting About Beneficiary Designations

It may seem like a good idea to leave all your assets to your family members in a will, but you need to make sure that your assets will actually pass as you intend them to. Don’t forget about assets that have beneficiary designations, such as insurance policies or retirement accounts.

A common estate planning mistake is for a parent to leave their estate equally to their children in their will, assuming that means all of their assets. However, assets that have a beneficiary designation or right of survivorship pass outside of a will. For example, let’s say you are a single parent with three adult children, and a house and other assets worth $900,000. In addition to those assets, you have a 401(k) retirement account worth $600,000. Asked to name a beneficiary on the account some time ago, you picked your eldest child.

If you were to die, your three children would split your probate estate of $900,000, getting $300,000 each. Even if you intended for your three children to split your retirement account, the beneficiary designation would supersede any instructions in your will. Your eldest child would be entitled to the full amount of the 401(k). They might share it with their siblings, but they wouldn’t be obligated to.

Avoid these estate planning mistakes by working with an attorney who can help ensure that you have planned for all of your assets appropriately and understand how each of them will pass to your beneficiaries.

Failing to Update Your Estate Plan

It’s often said that the only constant in life is change. Assets come and go; some family members pass away, and new ones are born. In light of all the changes life brings, it only makes sense to update your estate plan as well.

How often to update your estate plan will depend on the pace of changes in your own life. However, you should pull your plan out every few years to look at it and make sure it still meets your needs. Also, if you go through any major life changes, like marriage, the birth of a child, a divorce, loss of a spouse, or move to another state, that’s a good time to review and reevaluate your estate plan.

Remember, the reason you made an estate plan to begin with was to create security and peace of mind for your family. Leaving behind an estate plan that no longer fits your family’s reality is likely to result in confusion, conflict and maybe even costly litigation. That’s the opposite of your goal, and you can avoid those problems with a quick call to your estate planning attorney.

Avoid These Estate Planning Mistakes By Getting the Right Help

Perhaps the biggest estate planning mistake you can make is not calling an attorney in the first place, either because you kept putting it off or because you decided to “DIY” your plan. The problem with making an estate plan without an attorney’s help is that you don’t know what you don’t know. Any flaws or gaps in the plan will only become evident after you become incapacitated or pass away, when it’s too late to fix mistakes.

An experienced estate planning attorney will listen to your concerns and goals and ask questions that may not have occurred to you. She will then customize a plan to your unique circumstances. And she will be available down the road, to help your plan evolve with your life and your needs.

For more estate planning tips, and to learn more about avoiding estate planning mistakes, call 763-575-7930 or contact Mundahl Law to schedule a consultation.