Estate planning is an important process that allows individuals to control how their assets will be distributed after they pass away, and ensure that their loved ones are taken care of. However, many people make mistakes when creating an estate plan that can cause problems down the road. Here are the top 6 mistakes to avoid when creating an estate plan:
- Not having a plan at all: One of the biggest mistakes that people make is not having an estate plan in place at all. Without an estate plan, your assets will be distributed according to state laws, which may not align with your wishes or the needs of your loved ones. This can lead to disagreements and disputes among family members and can also result in hefty court fees.
- Failing to update your plan: An estate plan should be reviewed and updated regularly to ensure that it remains current and reflects any changes in your life, such as marriage, divorce, the birth of a child, or change in relationships with anyone named. Failure to update your plan can result in assets being distributed to people who you no longer want to receive them, or your loved ones being left without the proper care and support.
- Not naming a Guardian for your children: If you have minor children (under 18), it is important to name a guardian in your estate plan to ensure that they will be taken care of in the event of your death. Without a named Guardian, the court will make the decision, which may not align with your wishes. It is also important to consider the age and capability of the Guardian to raise your children.
- Naming minor children as direct beneficiaries: While you want to provide for your minor children, you should not name them as direct beneficiaries in your Will. Children under 18 cannot receive money outright in the State of Missouri. If they were to receive money under your Will, the Court would require that a cumbersome and expensive Conservatorship be opened up for that child in order to hold the money until they reach age 18. This can be avoided by setting up a Testamentary Trust within your Will that holds the money for the child’s benefit until he or she reaches a designated age.
- Not planning for incapacity: Many people focus only on what will happen to their assets after they pass away, but it is also important to plan for the possibility of incapacity. This can include naming an Agent under a Durable Power of Attorney to manage your financial and medical affairs in the event that you are unable to do so yourself. This can ensure that your wishes are carried out and that your loved ones are not put in a difficult position.
- Not considering a Trust: Trusts are extremely common these days, and the bulk of my clients are drafting Trusts to avoid their assets going through Probate Court. A Will does not avoid Probate Court, but a properly funded Trust does. Trusts are not just for the “rich and famous,” but are now a common everyday estate planning tool used by most people.
In addition to the above mistakes, some people also make the mistake of not considering the tax implications of their estate plan. Estate taxes can be quite high and can significantly reduce the amount of assets that are passed on to your loved ones. It's important to consult with an attorney to understand the tax implications of your estate plan and to make sure that you are taking advantage of all the tax breaks and deductions available to you.
Lastly, it's important to remember that estate planning is not just about what happens after you pass away, it's also about planning for the unknown. It's important to consider what will happen to you and your loved ones if you become incapacitated and unable to make decisions for yourself. A comprehensive estate plan will include not only instructions for managing your assets and providing for your loved ones after you pass away, but also instructions for managing your affairs if you become incapacitated.
In conclusion, estate planning is an important process that ensures that your assets and loved ones are taken care of after your passing. It utilizes numerous important documents that fit together like pieces in a puzzle. The best way to avoid a mistake is to seek the services of an estate planning attorney. Our office is happy to provide additional instructions, answer questions and provide support for our clients.