Making an estate plan is a huge task in itself. It will take time, money, and effort, and among other things, you might frequently stumble over strange legal jargon. Yet you can still make the procedure as efficient as you can.
Avoiding the errors that can truly mess up your estate plan is one approach to achieve this. Knowing what errors to look out for is the first step.
Many estate planning errors can lead to a large headache for family members and other loved ones left to deal with the fallout.
It is necessary to have a comprehensive Estate Plan to avoid a prolonged and costly probate process that could result from leaving crucial legal documents out of your estate plan.
Check out this Estate planning Documents Checklist from TrulyWill to avoid any kind of future stress.
Not making a Last Will and Testament
Even though Last Will and Testament is not the only best estate planning tool, they are one of the absolute necessities. You can specify in a Will who will inherit your assets after your passing and who your minor children's legal guardians will be. Without a Will, your assets will be dispersed in accordance with the intestate rules of your state, which are probably not what you would have preferred, and a judge will appoint a guardian for any minor children. And after they turn 18, your children will automatically inherit all you own, without your input, direction, or guidance.
Try TrulyWill for Free to make your Last Will and Testament online within a few minutes.
You may also find your state-specific requirements for a Last Will and Testament in this article.
Failing to fund your Living Trust
Creating a Living Trust does not end up with signing it. You will need to fund it. You need to understand how to fund your Living Trust to accomplish the goals for which the trust has been created.
Funding of a Trust involves the process of transferring assets or property to a Trust. A trust will own only those properties which are transferred to it. If a property is not transferred to a Trust it might be subjected to probate or Estate tax.
In a nutshell, a Living Trust is nothing without a Living Trust Fund.
How to fund your Living Trust?
There are 2 methods by which a Grantor can fund the Trust.
1. Throughout their lifetime.Using this method, assets or property can be transferred to the Trust by the Grantor which will be effective immediately while the Grantor is still alive.
2. Unfunded until death or incapacitation. By this method, the Grantor may choose to maintain the trust unfunded until death but they would still need to transfer assets to the trust account to take effect after their death or incapacitation.Read this article to know more about how to fund a Living Trust.
Not Updating Beneficiary Designations
There are certain assets that don’t need probate and are transferred directly to your beneficiary after you die. These are called non-probate assets and include:
- Insurance policies
People frequently overlook updating their beneficiary designations to reflect their estate planning goals. As a result, your savings from Insurance ad retirement accounts might get distributed among the people you do not want to give anything to.
Find out who would receive those assets in the event of your passing by contacting your life insurance provider and retirement account holders.Also, you should never designate a minor as the primary beneficiary of your life insurance policy or retirement account. If they were to inherit these assets, the court would have custody of them until they reached the age of 18.
Poor Communication with heirs
Keep in mind that your heirs will experience upset feelings, broken relationships, and in some cases, legal battles if you promise them one thing with your money or goods but do not make provisions in your plan for it to happen. Write a brief letter of explanation outlining your objectives or explaining why you changed your mind if your situation is more complicated and may call for more explanation. Although it has no legal standing, this could go a long way towards bringing comfort or closure.
Poor Recordkeeping of Assets
Your estate plan won't be very valuable if your assets aren't accessible to your heirs, even if you properly "funded" the trust with your assets.
Few things will make people settling your estate less happy than having to spend a lot of time and energy arranging, organizing, and locating all of your assets and possessions without you there to tell them where to look.
The most important component of any effective estate plan is a clear letter of instructions that informs your executor of where everything is, as well as the names and phone numbers of all the people they will need to contact, including your banker, broker, insurance agent, financial planner, lawyer, landlord, or tenants, among others. To make it easy to access your accounts, you should also list all of the financial websites you use along with their login details.