Adults should ensure they have a valid estate plan that accurately reflects their wishes. This plan must be handled in a way that complies with applicable laws so that it is fully enforceable when the time comes for your loved ones to use it.
There are several mistakes that people make when they are creating their estate plan. Reviewing some of the common errors might help you to avoid making them in your plan.
Not being specific in your will
Your will should name specific investments and assets that you need to pass down through it. Remember, you don't include any assets that are part of a trust because those will be handled by the trustee. When you name items in your will, make it clear how they will be divided. If you sell investments, lose them or give them away, make sure that you remove them from the will because there is a good chance that the estate would have to purchase the assets to distribute if they are still in the will.
Not checking beneficiary designations
Some financial accounts have beneficiary designations, including some bank accounts and investment accounts. Wills are governed by them so ensure that the beneficiary is who you want to take control of the asset when you pass away. It is a good idea to name a contingency beneficiary so that the account will go to someone if the primary person isn't alive any longer.
Not selling assets for fair market value
When you sell assets, you must ensure that you are selling them for fair market value. If you sell them for less, they might be viewed as gifts by the IRS. This could mean a heavy tax burden. It also means that if the person who bought the property from you at a discounted price sells it for fair market value, they will have to pay a tax on the gain, which could eat away a good portion of the profit.
Not setting a plan for minor children
If you have minor children, you have to make plans for them. You should include a guardianship designation so that you know they will be cared for. Having specific information about how assets intended for the children should be handled is critical. Leaving broad instructions can lead to a misinterpretation that might even include frivolous spending.
The more comprehensive that your estate plan is, the better it might help your heirs and beneficiaries. This can give you peace of mind since you know they are taken care of when you pass away.