When you’re putting together an estate plan, you’re juggling a lot of pieces. You have to consider the needs and wishes of your loved ones, and put those up against the realities of your finances. You have to plan for events that will happen well into the future, and that may not turn out the way you expect. And on top of all that, you have to make sure your plan meets all the legal requirements and will stand up in court after you are gone.
Given all these concerns, it’s understandable that people sometimes make mistakes when developing their estate plans. Some of the areas where people are most likely to make estate planning mistakes include:
- Failing to change beneficiaries: It is essential to update beneficiary designations as family relationships change. Many difficult cases in probate litigation result from a person who divorced and remarried but failed to update their beneficiary designations in their will. Beneficiary designations on retirement accounts and insurance plans should also be updated.
- Failing to account for major life changes: Updating beneficiaries can be important, but sometimes bigger changes are in order. When major assets change, such as moving to a new state, or the purchase or sale of a home, or it is a good time to update an estate plan.
- Treating all heirs equally: It is essential to account for the unique complexities of each person and their heirs in an individualized estate plan. While it may seem fair to divide an estate equally between heirs, this may not in fact be the best way to meet the needs of the family members. And, since real estate, sentimental items and other types of assets cannot be easily divided, a distribution that looks equal on paper may not seem fair when it’s time to carry out the plan.
- Giving in advance: To get around probate and possible tax consequences, people sometimes give away large amounts of their estates to their loved ones before they pass away. This can be a good practice, but it must be done carefully. Tax law places limits on the size of such gifts. Without proper guidance, people sometimes get into trouble when giving away assets.
Estate planning can be complex, but it is critical to get it right to make sure the estate planner’s wishes are fulfilled. Experienced estate planning attorneys can help people carefully consider an estate plan, and when and how to update it.