Estate plans are essential, as they ensure your loved ones have access to your assets after you are gone. As a result, virtually everyone must have an estate plan in place, regardless of their financial and family status.
When developing an estate plan, you must also know which estate planning practices to avoid to ensure the best possible outcome. Here are a few possible mistakes and how you can sidestep them during the process.
Not discussing your estate plan with your loved ones
Your family should know where to find estate planning documentation, such as information related to wills and trusts. Additionally, your loved ones should have a clear idea of how they can locate assets, which is an important part of processing a person’s estate. Consider creating a document that provides directives on these matters and make sure the relevant parties have access to it.
Not using a variety of tools
Estate plans consist of numerous components. While wills are an integral part of estate planning, most people require additional tools to ensure their assets remain protected. For instance, a living trust can help you avoid probate, which means loved ones will receive assets faster. You should also consider powers of attorney, which provide a trusted person with the authority to make healthcare and financial decisions on your behalf.
Not updating beneficiary designations
Certain assets, such as retirement accounts and life insurance policies, have beneficiary designations. These designations allow proceeds of these accounts to go directly to heirs after your death. Updating beneficiary designations is an important aspect of estate planning, as this information supersedes information within wills and other estate planning documents.
It is a good idea to revisit your information every few years to determine whether you need to update your estate plan. You should also update your plan after major occurrences, such as marriage.