5 common estate planning pitfalls

Those who take the time to put together an estate plan are already a step ahead of most families. Recent estimates show most Americans do not have an estate plan. The number of those who have created these documents ranges from 25% to 33%.

Although having a plan in place is a great first step, it is important to note that common mistakes can complicate or even thwart your intentions. Understanding five of the more common pitfalls can help you create a more effective estate plan.

Pitfall #1: Not updating your estate plan regularly

One of the benefits of having an estate plan is making sure your assets go to the people you want to benefit from your estate. A failure to regularly update these beneficiaries is one of the most common mistakes. This can result in unintended beneficiaries getting assets from your estate.

But how often should you update your plan? It is a good idea to review it with any major life events, such as marriage and divorce as well as the birth or death of a family member.

Pitfall #2: Failing to consider all assets and beneficiaries

Another frequent oversight is not accounting for all assets or failing to clearly designate beneficiaries for each asset. This can lead to disputes among heirs and potential legal challenges.

Pitfall #3: Not accounting for tax implications

Estate taxes can significantly affect the value of the assets your beneficiaries receive. Not considering these implications can result in a larger tax burden than necessary, potentially diminishing the value of the estate and leaving heirs with a surprise tax bill.

Pitfall #4: Neglecting to plan for incapacity

Many individuals focus solely on the distribution of assets after death and neglect to plan for potential incapacity. This oversight can leave critical decisions about health care and finances in the hands of the courts.

Pitfall #5: Failing to seek professional guidance

Attempting to create an estate plan without professional legal advice can lead to errors and omissions that jeopardize the plan’s effectiveness. Estate law can be complex, and state laws vary, making professional guidance crucial. Use of fill-in-the blank forms are not tailored to your specific situation and can result in unintended consequences.

Estate planning is a vital and intricate process that requires careful consideration and regular updates. Avoiding these common pitfalls can help to better ensure that your estate plan reflects your intentions.