One of the most important things that you can do for yourself and your family is create an estate plan. By having certain documents in place to take care of yourself and your loved ones in the future, you can mitigate or prevent future problems. Unfortunately, people often make crucial mistakes in their estate plan that can have devastating consequences for their families. Here’s a look at the top five estate planning mistakes that you need to avoid.
1. Not Having an Estate Plan
The biggest mistake you can make is not having an estate plan. According to a Caring.com survey, in 2017, only 42% of Americans have a will or similar document, and in 2020, that number has decreased by 25%.[1] Older and middle-aged adults are 20% to 25% less likely to have a Will in 2020 than in 2019.[2] The most common reasons for not having a Will are, “I haven’t gotten around to it” and “I don’t have enough assets to leave anyone”. Does this sound like you? The sad truth is, if you do not have a Will, your property will not automatically pass to your spouse or children. Your family members will likely spend most of their inheritance in a time-consuming court administration to access or transfer your property, and because the property asses under Texas’s heirship laws, property may not go to the people that you want to inherit it. By delaying your estate plan, you are actually costing your family more money in the future.
2. Failing to Update a Will
For those who have a will in place, a common mistake is to tuck it away in a drawer or shoebox. You need to review your estate plan every three to five years and reflect on any life changes – such as a marriage, a divorce, children being born, or a death in the family. Circumstances may have changed that make your distributions inappropriate. Updating your will regularly will best reflect your current wishes.
3. Not Planning for Disability
While no one like to think about future illness or injury, an unexpected long-term disability can have devastating consequences on your financial and personal affairs. It is essential to create a durable power of attorney and a medical power of attorney in case you are unable to make your own financial or medical decisions in the future. Also, if one of your named beneficiaries receives government assistance, receiving an inheritance might disqualify them from those benefits if the proper planning was not done in advance.
4. Naming Incapable Beneficiaries
There are cases where beneficiaries may not understand financial matters, may spend their entire inheritance immediately, or have their inheritance taken by creditors. In these situations, a will can appoint a professional or trustee to supervise these assets or put a spendthrift trust in place so those beneficiaries can still receive the benefit of their inheritance with additional protections.
5. Failing to Coordinate Beneficiary Designations
Failing to coordinate your beneficiary designations on financial assets with your estate plan can interfere with your estate planning objectives. You can forget to name a beneficiary or update a beneficiary designation on your bank accounts, retirement accounts, or life insurance, causing your assets to pass through probate after your death or pass to an unintended beneficiary. Or, you may have forgotten to update your beneficiary designations after a change in circumstances, such as a divorce or beneficiary death. For example, if you divorce a spouse and you forget to remove him or her as a beneficiary on a certain asset, your ex-spouse may still be entitled to receive those funds after your death. Or, if you designate a beneficiary who dies before you and you have not designated an alternate beneficiary, the assets will pass to your estate, even though you wished for that asset to go to a particular person upon your death. You will need to coordinate your financial asset beneficiary designations with your estate plan to make sure your accounts will be distributed as you intended and ensure an easier process for your loved ones.
In the end, estate planning is about getting your affairs in order. By taking the time to establish your estate plan with an estate planning attorney, you can avoid these common mistakes, protect your assets and provide for your loved ones.
Julia “Jules” Pullin is an associate attorney at The Dean Law Firm, PLLC, a boutique law firm practicing in estate planning, probate, guardianships, elder law, and civil appeals founded by managing attorney Julia Dean. Julia Dean has been recognized as a Top Attorney and Leading Advisor by Acquisition International, Forbes, Newsweek, H Texas, Houstonia, and the Sugar Land Sun, and has earned Martindale-Hubbell’s Client Distinction Award. The Dean Law Firm has been named “Texas’ Most Outstanding Estate Planning Boutique” by Acquisition International for the year 2019 and is also named “Best Law Firm of the Year” by Lawyer International Legal 100 for the year 2019. The Dean Law Firm is committed to bringing you peace of mind by providing thoughtful estate planning for your family.