26 Aug Avoid the top 5 biggest estate planning mistakes
BY CARRIE J. QURAISHI
A basic estate plan—addressing issues of inheritance, child guardianship, insurance, investments, powers of attorney, healthcare directives, and other important matters—is not something most of us like to think about.
But it is nevertheless vitally important. No matter your age or health, having an estate plan ensures that your personal wishes will be honored in vital financial, personal, and healthcare decisions. Unfortunately, many people make critical mistakes in addressing this important matter.
Mistake #1 – Failing to Make an Estate Plan
First, many people simply avoid the topic. It makes them uncomfortable; they think they are too young; they overestimate the cost; or they put it off because of complicated family situations.
But if you do not have an estate plan in place when the unexpected happens, you will be leaving your loved ones in the dark. They could easily end up spending the thousands of dollars that you thought you had saved by not creating an estate plan—and more—figuring out what to do for you if you become disabled, and what to do for themselves after you die.
Begin your estate planning early—while your mind is clear and the need seems remote. Then review and update your plan frequently to ensure that it will work the way you intend when it is actually needed.
Mistake #2 – Forgetting the Little Things
Others who do begin a plan often overlook their personal effects, such as jewelry, art, and collectibles. Don’t simply assume that your loved ones will agree on how to divide it all up. In my experience, these are the things over which people argue the most. Ask what everyone wants, then make a simple but smart estate plan for your “stuff.”
Mistake #3 – Outright Bequests to Children
Far too often, I see simple wills allowing very young adults or even minors to receive large inheritances outright. Most 18-year-olds (never mind children) are simply not ready to manage substantial sums of money. At a minimum, your will should provide that—until a child either reaches a certain age or achieves an adult milestone such as college graduation—his or her money be held in trust. The trust can provide for a college education, and/or anything else deemed appropriate by the trustee. Better yet, keep the child’s inheritance in trust for his/her lifetime. When properly drafted, such a trust can protect the inheritance from a possible ex-spouse or creditors, and can ensure that a financially irresponsible heir doesn’t spend the inheritance too quickly on frivolous things.
Mistake #4 – Incorrect Beneficiary Designations
Do you know which of your accounts have beneficiaries, and whom you have designated designated for each? Are your choices up-to-date? When you designate a beneficiary, s/he inherits the assets in the account, regardless of what your will might say (so updating your will periodically might periodically might not be enough). Typically, you will have beneficiaries for each of your IRA’s, 401(k) or other retirement plans, annuities, and insurance policies.
Mistake #5 – Not Editing Your Plan Along the Way
Life is far from predictable. So your estate plan, like any financial plan, should be updated as your financial and personal circumstances change. Life events such as birth, marriage, divorce, job loss, health condition, etc., should all factor in to your estate plan. Beyond that, you should also keep a serious eye on the ever-changing laws in both the state where your estate plan was drawn up, and in the country as a whole.
As important as it is, many of us put off managing our estate planning. Some of us are simply uncomfortable discussing our own passing, while others think it does not apply to us. All too often, we wait until it is too late. Then when an unexpected accident or a serious illness occurs, the vital importance of estate planning is suddenly forced upon us by circumstance.
Don’t let this happen to you! As an experienced estate planning attorney, I can guide you through the entire process. I can help you make informed decisions and select options that will most effectively protect your family and secure your assets.
Quraishi Law Firm
2591 Dallas Parkway, Suite 300, Frisco, TX 75034
Call us today at 972-731-4337
or visit our informational website Member of the American Academy of Estate Planning Attorneys www.quraishilaw.com