We all know estate planning can feel like a daunting task, fraught with emotional considerations and complex legalities. It's understandable why many people might hesitate to delve into this necessary aspect of financial planning. Yet, avoiding estate planning altogether or neglecting to revisit your plan can lead to costly mistakes down the road.

Let's explore some common pitfalls and strategies to avoid them.

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Blunder #1 – Not having an estate plan:

Despite its importance, a surprising number of individuals haven't documented their end-of-life wishes. Having an estate plan isn't just about protecting your assets; it's about providing for your loved ones and ensuring your wishes are carried out. While estate planning may not be enjoyable, it's a crucial step to safeguard your legacy and ease the burden on your family.

If you don’t have an estate plan in place, you could be putting your assets at risk. More importantly, you’re missing an important opportunity to provide for your children following your death. You probably won’t meet anyone who tells you they enjoyed the estate planning process. However, it can feel very comforting to have a well-thought-out, carefully executed estate plan. It’s also a valuable gift for your loved ones that can save them significant time, stress and money.

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Blunder #2 – Thinking a will is enough:

While a will is a fundamental part of estate planning, it may not be sufficient on its own. Without additional strategies like trusts, your estate could be subject to probate, a costly and time-consuming process. In addition, probate proceedings are a matter of public record, which means anyone, including creditors, fraudsters and estranged family members, can find out who’s inheriting your assets and how much they stand to receive.

Moreover, a will only addresses what happens after your death; it doesn't protect you or your assets while you're alive.

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Blunder #3 – Only planning for after you die:

Estate planning isn't just about distributing assets; it's also about protecting yourself in case of incapacity. Documents like financial and healthcare powers of attorney ensure that someone you trust can make decisions on your behalf if you're unable to do so.

If you become incapacitated without these documents in place, your loved ones will need to go before a probate judge to request authorization to make financial and healthcare-related decisions. As mentioned earlier, probate is a matter of public record, which means the court must hold a public hearing to determine what’s most certainly a very private matter. Like any court proceeding, the process can take a long time and lead to significant legal expenses.

In addition, the person appointed to manage your affairs may not be someone you’d want to have decision-making authority.

You can save both yourself and your loved ones a lot of time, stress and money by having powers of attorney in place before an unexpected event occurs.

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Blunder #4 – Thinking you're not old or wealthy enough to need a plan:

Estate planning isn't just for the wealthy or elderly. Regardless of age or net worth, everyone should have essential documents like powers of attorney, signed HIPAA waivers to ensure your loved ones have access to your medical information, and a basic will. These documents can provide crucial protection and ensure your wishes are respected.

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Blunder #5 – Taking a "set-it-and-forget-it" approach:

Estate planning isn't a one-time task; it requires ongoing attention and updates as your life circumstances change. Major life events like marriage, divorce, the birth of a child, a home purchase, or the start of a new business can necessitate revisions to your plan.

There are also changes to the law that can significantly impact whether your estate plan can be followed according to your wishes. The SECURE Act, for example, made significant changes to the laws around inherited retirement accounts. A plan that doesn’t account for these types of changes can create major roadblocks for the people trying to administer your estate.

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Blunder #6 – Failing to properly title trust assets:

Trusts offer several benefits that wills don’t. Like wills, trusts allow you to specify how your assets are to be distributed following your death. However, unlike assets passed along via a will, trust assets aren’t subject to probate and can be transferred more quickly to your heirs following your death.

However, for a trust to be effective, your assets must actually be controlled by the trust at your death. After establishing a trust, it’s essential that you complete the extra step of “funding” your trust. This process involves taking steps such as retitling all your real estate and financial accounts into the trust and updating beneficiary designations to direct assets to your trust at your death. This can be a time-consuming task, but it’s absolutely vital to ensure the effectiveness of your planning efforts.

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Blunder #7 – Not integrating your estate plan with your overall financial plan:

Your estate plan should be seamlessly integrated with your overall financial strategy. By aligning your estate planning goals with your broader financial objectives, you can ensure a coordinated approach that maximizes wealth transfer, minimizes tax liabilities, and supports your legacy.

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Could you use some help reviewing and implementing an estate planning strategy? GatePass is here for you. Please schedule a call with a member of our team.

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