A person’s wishes and goals can change over time, as can important changes in the law. Therefore, periodic reviews (at least every 1 to 3 years or certain life events such as marriage, divorce or birth of children) of your Estate Plan are necessary to ensure it is up to date and to avoid some of these common estate planning errors.
- Failing to understand the state your Estate Plan. You need to be aware of the estimated total value of your estate (i.e. values of real estate, personal property, bank accounts, retirement accounts, etc.), as well as what your Estate Plan documents dictate how your assets and debts will be handled upon your death. Simulating this scenario in current terms will help provide you with clarity and identify areas of your Estate Plan that need addressed or revised.
- Not sharing your Estate Plan with your children. It is important to share the important components of your Estate Plan with your children once they become adults. This can achieve two goals: allow them to ask any questions for you to answer while you still can and hopefully make it a little easier by preparing them in advance when the time comes for your Estate Plan to come into play.
- Leaving your assets outright to your children. Leaving an inheritance to children before they are old enough to maturely deal with same can have bad results. By utilizing a Trust you can provide for their health, education and welfare while not give them a large sum of money all at once until they have reached an age you deem appropriate.
- Automatically choosing your oldest child as your personal representative. Just because they are the oldest child does not qualify them as the best person to be your personal representative. It is best to choose your personal representative based on their qualifications to handle such important tasks (i.e. power of attorney, healthcare surrogate or executor). You may even want to choose more than one of your children to serve jointly. In some cases, none of the children are deemed qualified for these personal representative roles and another family member or friend may be chosen to serve in these positions.
- Failing to review your beneficiary designations and titling of assets. As part of your Estate Plan, you should periodically (at least every 1 to 3 years) review your beneficiary designations to make sure they are in accordance with your wishes. Likewise, you should make sure your assets are titled in accordance with your wishes (i.e. held in Trust or jointly with a spouse). More specifically, you should review your beneficiary designations and titling of assets when certain life events occur such as marriage, divorce, birth of a child, death of a beneficiary, or receipt of an inheritance.
- Failing to consider inheritance taxes. Depending on your Estate Plan, inheritance taxes may affect you depending on the classification of the beneficiaries named and the size of your estate.
- Failing to have a business succession plan. There are many factors to consider in your Estate Plan when you own a business. What will happen to the operation of your business if you become incapacitated or deceased.