We all make mistakes, great and small. Some errors are easy to fix. However, the person who flubs their estate planning may not have that option because the error shows up after they have become incapacitated or died. However, let’s look at some common estate planning mistakes and how to fix them now.
#1: Failing to Update Your Estate Plan
Estate plans should evolve to fit your life. After all your goals as a single young professional are far different than as a parent – or empty nester – or senior citizen. Major events like births, deaths, marriages, and divorces should trigger an immediate review of your estate plan. However, it’s better to have regular maybe even annual reviews of your plans.
For example, Blake and Tina prepared Wills 25 years ago. They figured there was no need to prepare new Wills or to engage in any other estate planning. They were wrong. During that 25-year time span, they had three children, built several businesses, bought real estate, and increased their net worth substantially. When Blake and Tina pass away, their families will be stuck trying to work their out-of-date Will.
#2:Â Failing to Coordinate Your Estate Plan with Beneficiary Designations
Much of an estate plan deals with finances – assets, money, financial accounts, and real property, for example. When a decedent’s assets become part of their probate estate, they are split according to the terms of the Will or according to Alabama intestacy laws.
However, not all assets become probate assets. Accountholders for financial accounts and insurance policies, for instance, typically name beneficiaries. Upon the accountholder’s death, funds remaining in the accounts are given to the beneficiaries instead of passing through probate.
You should sync your beneficiary designations with your estate planning to keep your estate in balance.
For example, Blake and Tina prepared a current, up-to-date estate plan several years ago. They then opened some financial accounts and purchased life insurance policies and named beneficiaries on the accounts. Unwittingly, they created a potential imbalance. As things stand, if Blake and Tina died together, their oldest son would receive more from their estates due to their beneficiary designations.
#3:Â Failing to Plan for Incapacity
Estate plans are not just about death. When someone becomes incapacitated and unable to make their own decisions, it’s important to have a durable power of attorney and an advance directive in place. Both of these documents name agents to take over for the incapacitated person. In addition, your Will has no effect until your death. However, you may set up a revocable living trust and name a successor trustee to take over if you become incapacitated.
For example, Jan’s estate plan consisted of a Will only. Jan later suffered a traumatic permanent brain injury and was unable to make decisions for herself. Her family was forced to ask a judge to appoint a guardian and a conservator to handle her affairs. Jan could have made things easier by addressing potential incapacity in her estate plan. In addition, she could have engaged in some Medicaid planning.
#4:Â Failing to Prepare an Estate Plan
This the biggest mistake of all. An estate plan protects you and your family.
The attorneys at Miller Estate and Elder Law help their clients develop estate plans that suit their circumstances. Contact Miller Estate and Elder Law at 256-251-2137 to schedule an appointment. Though our offices are in Anniston and Birmingham, we help clients in Talladega, Gadsden and surrounding communities.