Unless you are a Buddhist monk, you probably try to avoid thinking about your own death. On the other hand, not thinking about the inevitable does not change the fact that eventually death is something that will occur. Therefore, it is a good idea to start planning for it in order for you to preserve some intergenerational wealth for your intended heirs. However, as you are planning for estate administration you should be aware of the most common estate planning mistakes in order to avoid serious problems in the future.
Neglecting to plan at all
Failing to make any plans for estate administration is the worst thing you can do in preparing for the future. If you have yet to start designing an estate plan, there is no better time than now to begin.
No Power of Attorney
Another common oversight when it comes to an estate plan is forgetting to name a power of attorney. The power of attorney document names an individual or entity which will have legal control over making decisions on your behalf in the case that you are incapacitated. A financial power of attorney is for making financial decisions on your behalf while a healthcare power of attorney pertains to making medical decisions on your behalf.
Choosing only one beneficiary
It is best practice to name more than one beneficiary just in case your primary beneficiary passes away before you do. In this situation, your second beneficiary, known as the contingent beneficiary, will be next in line to receive your estate or particular asset. However, many people neglect to choose more than one beneficiary which can result in issues down the road.
Not accounting for digital assets
Many people will forget to include their digital assets in their estate plan. This may include things like access to online financial accounts, social media accounts and email accounts. In order to avoid headaches for your beneficiaries you will need to name a digital executor for your digital assets.
Failing to consider charities you want to support
Most people will have social issues or certain causes that they care about. However, it is common for people to forget to consider this when designing an estate plan. You may want to consider naming a charity as a beneficiary of your estate or of a particular asset. For example, you can choose a charity as the beneficiary of life insurance proceeds.
Infrequent plan updates
Circumstances and needs change for people after they have created their estate plan. This means it is important to revisit your estate plan often in order to make sure that the plan still aligns with your needs and intentions. Inheritance tax laws or other tax regulations may change which may make your current estate plan not as efficient in preserving generational wealth for your heirs. Also, your personal relationship to beneficiaries may change which means you may want to remove a beneficiary for one reason or another. On the other hand, you may want to add another beneficiary in some instances.
Either way make sure to thoroughly consider your options when creating a new estate plan or adjusting an existing one. A professional financial advisor may be quite helpful in navigating through the estate planning process.
Any opinions are those of the author and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice.