11 Common Mistakes in Estate Planning

1. Not Having An Estate Plan

The biggest mistake you can make in estate planning is not having an estate plan or having an incomplete estate plan.

Not having an estate plan can expose you and your family to numerous risks, including:

• State-controlled distribution of assets

• Family conflicts

• Increased taxes and legal costs

• Long (and costly) probate process

• No guardianship designation for minor children

• Limited control over healthcare decisions

• Risk of disinheriting loved ones

The first step to preserving your family and your legacy is to work with an accredited professional to draft your estate planning documents. An accredited professional can answer your questions and walk you through the basics, such as creating a Will and Powers of Attorney. An accredited professional can also help you develop a more complex plan with a trust if you need one.

2. Waiting Too Long To Start the Estate Planning Process

It is easy to push estate planning aside until it is too late. Estate planning should be completed when you are in good health, not in an emergency situation. It takes an average of 90 days to complete the execution of an estate plan. It’s not a one-step process. You will need to have an initial meeting with an estate planning attorney, who will need time to draft documents based on your wishes. A signing meeting is required in order to execute and review the estate planning documents. After your estate plan is completed and signed, you will then want to review your beneficiary designations and titling.

3. Not Communicating Your Estate Plan Details With Family And Beneficiaries

The legacy you hope to leave, and the plan of distribution should be discussed with your family, beneficiaries, and all additional parties involved. This will help eliminate confusion and conflict. You will also want to make sure your family and beneficiaries can locate your estate plan at the time of an emergency or death.

Original estate planning documents should be kept in a fireproof location, and you should give copies of your completed and signed estate planning documents to your healthcare and financial agent, as well as your healthcare providers.

It is also a good idea to give copies of your completed estate planning documents to your investment professional.

At Bernicke, we keep electronic copies of your estate planning documents. This helps ensure they are reviewed every 3 years and are available digitally upon your request.

4. Having An Outdated Estate Plan

The world we live in is constantly changing, and that sentiment rings true with estate planning as well. It is critical to keep your estate plan updated to ensure that all current laws are being followed for the state in which you reside.

Attorneys recommend that an estate plan be reviewed every 3 to 5 years. Power of Attorney documents may be denied by a healthcare facility or financial institution if they are more than 10 years old.

5. Forgetting to Update Beneficiary Designations

Over time, personal circumstances can change—such as the birth of children, marriage, divorce, or the passing of loved ones—making it crucial to regularly review and update beneficiary designations on your accounts and policies.

Failing to do so can lead to unintended consequences, such as:

• Inheritance going to the wrong person

• New family members being left out

• Estate planning documents and beneficiary designations that don’t align

The attorney you work with can provide instructions for making these important updates. It is also important to have any new assets titled correctly and ensure they have the proper beneficiary designation.

Make small adjustments today to avoid big problems tomorrow!

Smart Tip: Use an Estate Planning Review to ensure all major areas are covered and updated. Your financial advisor can help you with this.

6. Assuming Your Estate Plan Will Automatically Distribute Assets To Your Heirs

If you’re like most people, you probably assume the instructions in your Will dictate how all your assets will be distributed—but this isn’t always true.

Beneficiary designations on specific accounts or policies take priority over what is written in your will. For example, your Will might state that 10% of your assets should go to charity, yet all of your assets have beneficiaries listed as 50% to your son and 50% to your daughter. At the time of your death, the account would pay out 50% to your son and 50% to your daughter. No money would pass on to the charity as you intended in your estate plan.

7. Naming Only One Beneficiary

You should always name more than one beneficiary on all relevant accounts, assets, and policies. A primary beneficiary and a contingent beneficiary should be named on every asset.

If your primary beneficiary passes away before you and you haven’t named a contingent beneficiary, the asset will default back to your estate. When this happens, it becomes subject to the probate process, which can create unnecessary challenges for your loved ones.

8. Unfunded Trusts

An unfunded trust is an overlooked detail that can derail your estate plan.

Trusts serve many roles including protecting your assets from creditors, ensuring assets pass the way you intend, and keeping your personal and financial assets private. 

Your trust cannot accomplish those goals if it is not funded. Once your trust is established, you will then need to work on retitling assets into the name of the trust. 

9. Not Accounting For Certain Situations with Beneficiaries

It may be a good idea to restrict money or extend distributions for a certain timeframe, depending on a beneficiary’s personal circumstances. It may also make sense to have charities listed within your documents or on a specific account.  Some assets may go into your trust at the time of passing through a beneficiary designation. If you don’t do this, then accounts will not pass the way you intend.

10. Naming The Wrong Person To Act On Your Behalf

It is important to designate someone you trust to act on your behalf. This person must be trusted to carry out your wishes. 

Sharing your intentions and wants with your designated individual ensures they feel confident and prepared to act appropriately when the time comes. This could be a family member, friend, or even a professional company.

Smart Tip: Choose someone you trust and can carry out your wishes, even when faced with conflict.

11. Forgetting About Digital Assets

Digital assets don’t immediately spring to mind when creating an estate plan, but they are a crucial part of your end-of-life planning.

Make sure to include digital assets in your estate plan and assign an individual to handle your online bank accounts, photographs, email accounts, social media accounts, etc. the way you’d like them handled.

As part of our estate planning process at Bernicke Wealth Management, we review your current estate planning documents and your beneficiary designations on all investment accounts.

We go above and beyond to ensure all assets are titled correctly and have proper beneficiary designations.

If you have questions about estate planning or are interested in scheduling an estate planning meeting with our team of advisors, please call 866-832-1173 or email info@bernicke.com.