Estate planning can be a complicated process, made all the more difficult by the fact that once we’re gone, we can no longer amend the instructions we leave to our loved ones. Bad investments can be sold and bad loans can be refinanced, but mistakes made during the estate planning process will be impossible to rectify if you are no longer around. That’s why despite the discomfort surrounding it, estate planning must be done thoroughly, thoughtfully, and with room left for updates should your life situation change. In this edition of our blog, we will explore the five estate planning mistakes you need to be sure to avoid.
If you’re looking for assistance in creating a personalized financial plan, speak with a CERTIFIED FINANCIAL PLANNER™ professional at Good Life Financial Advisors of NOVA today!
Not Having An Estate Plan At All
Estate planning isn’t just for the super-wealthy! Whether you’re leaving millions of dollars’ worth of assets to heirs or simply want to assign a guardian to minor children, you need to formulate some kind of plan. For many people, that means simply setting up a will and a few other common legal documents. For others, it may mean opening a trust and filling it with various assets. No two estate plans will be the same, so you should work in conjunction with your attorney and financial advisor when drafting your plan.
Relying on a Will
When I talk to a new client about estate planning, I oftentimes hear, “I have a will, so I’m all set.” As we dive deeper into the conversation, it usually becomes apparent that there are joint accounts, beneficiaries on IRAs and life insurance, or transfer on death accounts. What you may not realize is that beneficiary designations and account titling take precedence over what is written in a will. Having a will is certainly important. However, you must ensure that the other areas of your financial life do not negate the intent of your will, and ultimately cause unnecessary hassle or pain for your heirs.
Failing to Fund a Trust
A living trust is a useful estate planning tool that can provide instructions for asset distribution that avoids the hassles of probate court. However, trusts must be funded. If you have an investment account or house you want to leave to heirs through a trust, you must sign ownership of the asset over to the trust. If assets aren’t assigned to the trust, they’ll be dispersed through other methods, and that usually requires the involvement of the courts.
Neglecting to Assign Power of Attorney
One of the documents that often slips through the cracks of estate planning is the Durable Power of Attorney. Unfortunately, there are many medical conditions that can rob us of our mental awareness and ability to reason. Assigning power of attorney takes away uncertainty when it comes to incapacitation.
Not Updating Your Plans
Life moves fast and change is one of the few constants. Unexpected events happen and we must be flexible when dealing with uncertainty. Flexibility also applies to estate planning—if your life situation changes, so does your estate plan. Remember, these aren’t ironclad financial arrangements. Wills and trusts can be altered and updated however you see fit. If you go through a divorce or change your mind about having children, your estate plan must be updated to reflect these changes.
As mentioned previously, no two estate plans will be the same. That’s especially true if your estate plan requires unique caveats for minor children, children with disabilities, or families of divorce. These scenarios often require delicate handling of the estate planning process, so always let your financial advisor know early if these special considerations apply to you. For example, leaving assets to a child with special needs requires specific special needs planning in order to prevent them losing medical and financial government benefits.
Work with an Independent Financial Advisor
If you have any questions about the five estate planning mistakes you need to avoid—or any other part of the estate planning process—a financial advisor from Good Life Financial Advisors of NOVA can assist you. Contact us today!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.