5 ways to mess up estate planning

In order to ensure the effective and orderly distribution of a person’s assets after death, it is essential to maintain an effective and up-to-date estate plan. However, in the settlement process, even small errors can cause huge problems, and in many cases, these errors cannot be corrected by anyone. There are several key mistakes that can lead to flaws in the estate plan, most of which can be easily avoided by regularly reviewing your or your client’s plan and keeping it up to date. In this article, we will discuss the five most common estate planning errors.

Key points

  • After major life events (such as birth, death, marriage, or divorce), check your estate planning documents to ensure that your list of beneficiaries reflects the people you wish to acquire assets.
  • Omitting important legal documents in your estate plan may mean that your estate will go through a long and expensive probate process.
  • Poor records can make it difficult for your estate executor to track and allocate your assets after your death.
  • Poor communication with heirs can lead to broken relationships and legal disputes.
  • Failure to develop an estate plan may cause heartache to your heirs, as well as the high court and legal fees required to resolve your estate.

Failed to update your beneficiary

Marriage, divorce, birth, and death all affect who will receive your assets. Make sure that the person you intend to leave the asset to is clearly listed on the appropriate form. Whenever any of these changes, remember to properly update all financial, retirement and insurance accounts and policies, as well as your wills, trusts, and other legal documents.

Omit legal documents

Your will may be intact, but in most cases, if the dollar value of your estate exceeds a certain amount, it will not exempt your assets from the probate process. According to the law, certain assets are essentially exempt from probate, such as life insurance, retirement plans, and annuities. Financial accounts designated by beneficiaries with transfer of death (TOD) or payment on death (POD) are also not subject to probate law, although these types of designations have advantages and disadvantages.

But all other assets are usually subject to the state-designated heritage liquidation procedures. A revocable living trust is the main tool used to exempt all other assets from probate. If the will is challenged and incurs a lot of court and legal costs, this process may be delayed for a long time.

32.9%

According to Caring.com’s “2021 Wills and Estate Planning Study”, the percentage of American adults who have a will in 2021.

Bad record

Few things will make you enjoy these things better than spending a lot of time and energy searching, organizing and tracking all your assets and belongings without you being there to guide them where to find them.

The ultimate key to any successful estate plan is a concise letter of instruction that tells your executor the location of all items, the name and contact information of everyone they will have to deal with, such as your banker, broker People, insurance agents, financial planners, lawyers, landlords or tenants, etc. You should also list all the financial websites you use and their login information so that you can easily access your account.

Poor communication

Tell your heirs that you will use your money or property to do something, and then fail to prepare for it in your plan. This will definitely hurt your feelings, break the relationship, and in some cases cause legal disputes. If your situation is a bit complicated and may require additional explanation, you’d better write a simple explanation letter outlining your intentions or telling them why you changed your mind. Even if it is not legally authorized, this can greatly help provide closure or peace of mind.

Failed to plan

Although this error can easily be the most obvious error on the list, it is also one of the most common errors. There are many stories of very, very wealthy people in history who almost lost all their property due to court fees and legal fees because they did not plan ahead in this area. For those who may have to pay inheritance taxes, making a plan is particularly important.

Why is estate planning important?

The estate plan allows you to choose who inherits your assets and possessions after your death. It can help you protect your loved ones, such as your spouse and children, so that they can meet their needs after you die. A properly written estate plan can reduce or eliminate estate taxes, court fees, and legal fees. It can also reduce family quarrels and tensions that may occur if you die intestate.

What does estate planning lawyer do?

Estate planning lawyers, also known as probate or estate law lawyers, are responsible for helping their clients develop written estate plans. Estate planning lawyers are licensed legal professionals who are familiar with state and federal laws related to estate and probate procedures. They can help with various estate planning tasks, such as creating wills and trusts, appointing beneficiaries, and establishing enduring powers of attorney.

What is the role of the executor in estate planning?

The main responsibility of the executor is to execute the instructions of the deceased as outlined in the will or trust. The executor is appointed by the testator (called the testator). If there is no executor, the court will appoint an executor.

The executor has many responsibilities. This includes accounting for all assets listed in estate planning documents, ensuring that all debts of the deceased are paid, and transferring the assets to the correct beneficiaries.

Bottom line

These are just some common estate planning errors that often occur in the estate settlement industry. For more information about what you need to do to ensure that your assets are diversified according to your wishes, please contact a qualified estate planning lawyer.

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