3 Simple Mistakes That Can Derail Your Estate Plan

Avoid These Common Estate Planning Mistakes to Protect Your Family

If you're considering using a DIY estate planning service or have already created a plan that you're not entirely confident in, it's crucial to understand how simple errors can undermine your estate plan and leave your family with unnecessary complications and expenses.

Many people believe they can save time and money by creating their own estate plan online or with a non-specialist attorney. However, after the plan is completed, they often worry if this quick and inexpensive solution will actually meet their needs or if it might end up causing more problems. A review of these plans frequently reveals fundamental mistakes that could have severe consequences, mistakes that might not be obvious without professional scrutiny.

Creating an effective estate plan requires specific expertise. What seems like a minor detail to an untrained eye can lead to significant issues. Clients often discover that their DIY plan, instead of being a cost-saving measure, ends up being far more expensive due to the errors it contains. If these mistakes aren't identified while you're still alive, your loved ones will bear the burden of resolving them.

Common Estate Planning Mistakes

1. Distributing Assets Directly to Beneficiaries

One common mistake is leaving assets outright to loved ones. This approach has several pitfalls:

• Assets are vulnerable to beneficiaries' creditors.

• Money can be quickly spent without any safeguards.

• For minor beneficiaries, a court will appoint someone to manage the assets, possibly not the person you would have chosen.

A better strategy is to distribute assets through a trust. This ensures your assets are managed by a chosen trustee and protected from creditors and poor financial decisions. For minors, a trust is crucial as it prevents the court from appointing a possibly unsuitable trustee and protects the assets from being prematurely squandered when the minor reaches adulthood.

2. Not Establishing a Lifetime Asset Protection Trust

Simply setting up a trust is not enough if it directs assets to be taken out and given to the beneficiary at a certain age. This still exposes the assets to legal and financial risks. Instead, consider a Lifetime Asset Protection Trust, which keeps assets protected indefinitely while still supporting your beneficiaries. Many professionals might not recommend this unless you have a substantial estate, but protecting even a modest amount of assets can significantly impact your loved ones' future.

3. Overlooking Beneficiary Designations

Another frequent error is not updating beneficiary designations on insurance policies and retirement accounts to align with your estate plan. If these designations are outdated or incorrectly listed, assets might bypass your trust and be distributed directly to the named beneficiaries, potentially disrupting your intended plans. It's essential to regularly review and update these designations to ensure they reflect your current wishes and estate plan.

Comprehensive Estate Planning

To ensure your estate plan works as intended, all your assets must be properly reviewed and updated to reflect your trust or other estate planning methods. Regularly updating your asset inventory and ensuring all accounts are correctly designated can prevent future complications.

If you're considering a DIY estate planning service or had a plan created by a non-specialist attorney, it's crucial to check for these common mistakes. Failure to do so could leave your family dealing with legal conflicts and court proceedings.

Don't let a simple mistake undermine your estate planning efforts. Make sure your estate plan is thorough and correctly implemented to provide lasting protection and support for your family. Your loved ones will be grateful for the foresight and care you put into securing their future.

This article is a service of Zarda Law, S.C. We do not just draft documents; we ensure you make informed decisions about life and death, for yourself and the people you love. That's why we offer Legacy Planning Session, during which you will get more financially organized and make all the best choices for the people you love. You can begin by scheduling a Legacy Planning Session and mention this article to find out how to get this $750 session at no charge.