A solid estate plan ensures proper distribution of your assets after you are gone. While having a plan in place is important, avoiding common mistakes is equally so.
To prevent errors, you must have a good understanding of the process.
Get started early
Procrastination is a common pitfall when it comes to estate planning. Many people assume they have plenty of time, but the truth is, life is unpredictable. Starting early allows you to create a comprehensive plan that reflects your current situation and desires.
Create a will
Creating a will is a fundamental step in developing an estate plan. It allows you to specify who will inherit your property, money and personal belongings. Without a will, state laws will dictate how to divide your estate, which may not align with your wishes.
Select an executor
Selecting a responsible and trustworthy executor is another important step. This person will be responsible for managing your estate, paying debts and distributing assets according to your will. Because so much is at stake, your executor must exhibit responsibility and be fully willing to take on the role.
Consider beneficiary designations
Certain assets, such as life insurance policies and retirement accounts, have beneficiary designations. These designations dictate how much of each asset goes to your heirs. They also override your will, so you must review and update them regularly. Failing to do so can lead to unintended consequences.
Make a plan for incapacity
Estate planning also allows you to plan for potential incapacity. Documents like a durable power of attorney and a healthcare proxy designate someone to make financial and medical decisions on your behalf. As a result, they offer immense peace of mind that you will receive the proper medical care when faced with a life-threatening medical issue.
Keep your plan updated
Life is constantly changing. Marriage, divorce, births, deaths and changes in financial circumstances can all impact your estate plan. Regularly review and update your plan to ensure it remains relevant and effective.
Keep in mind that 67% of Americans lack a comprehensive estate plan, according to CNBC. The families of these individuals could face significant challenges in the event of their loved one’s passing, which highlights why all people should have an accurate and reliable plan in place.
