Estate planning is something many people know they should do, but far too often, the process gets oversimplified or put off entirely. Professionals with busy careers, growing families, and increasing financial responsibilities often assume a basic will is enough, overlooking other important considerations like taxes, healthcare decisions, and more. The result? Gaps that can leave loved ones stressed, confused, or unprotected. Here are five common estate planning mistakes to watch out for when it comes to your planning.
Mistake 1: Assuming a Will is Enough (Or That It’s One-and-Done)
Many people think once they’ve drafted and signed their will, they are done with estate planning forever. This common misconception can lead to heartaches (and headaches) for their families later down the line. It’s important to remember that a will only outlines how you prefer your assets to be handled after your death; it does not cover decisions that may need to be made during your life. Furthermore, a will is at its strongest when it is kept current. What happens if someone important enters or leaves your life? Failing to update your will in these cases can lead to unpleasant surprises later down the line.
Mistake 2: Overlooking Beneficiary Designations
Another common misconception is that a will covers “everything.” Certain types of assets generally pass outside of a will via beneficiary designations. But did you know that these designations typically override the instructions in your will? That’s why keeping them up to date is so important. Examples of assets that often pass through beneficiary designations include life insurance policies, living trust assets, retirement accounts, transfer-on-death securities assets, and any assets that are owned jointly, like homes or certain business partnerships.
Mistake 3: Not Planning for Healthcare Emergencies
No one wants to think about what will happen if they’re involved in a serious accident. Unfortunately, failing to plan for such a situation can lead to a lot of grief. Having a power of attorney and a living will in place can allow you to outline exactly how you would like decisions surrounding your healthcare to be handled when you cannot make them yourself, alleviating a huge burden on your family. Combined, these documents enable you to designate a healthcare surrogate and provide specific instructions regarding what you would like to be done in the event of a serious injury or illness.
Mistake 4: Ignoring Tax Implications
Currently, the federal estate tax exemption sits at $13.99 million. Because this number seems high, many professionals make the mistake of assuming they fall well below the threshold. It’s important to remember that the value of an estate can quickly add up, especially when taking into consideration assets such as cars, boats, real estate, and art collections. In addition, there are also state estate taxes to consider. Many states have much lower exemptions, in some cases as low as $1 million. Luckily, there are several strategies you can explore to reduce your taxable estate, such as establishing trusts or gifting specific amounts to those you love over the course of your lifetime.
Mistake 5: Failing to Involve Family
Some professionals avoid talking about estate planning mistakes with their families simply because they don’t want to worry them. However, leaving family out of the conversation can lead to surprises, confusion, and disputes down the road. Your family deserves a chance to sit with you and discuss your decisions, as well as understand how they can best support you during your lifetime and honor your legacy after it. Talking about complicated finances, medical emergencies, funeral and burial decisions, and other matters can be difficult, but it’s the best way to ensure your family will have the guidance and support they will need in the future.
Your Family Deserves a Thoughtful Plan
Many estate planning mistakes happen either because people don’t realize what should be included or because they put it off until it’s too late. As you can see, the costs of doing so can be immense, both financially and emotionally. By working with an estate planning attorney and taking time to think through the full picture, you can put the right pieces in place now to protect your future and give your family peace of mind.
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