It’s no secret that estate planning is at the bottom of most Americans’ list of priorities. In fact, as much as 60% of the population doesn’t even have a simple will drafted. I don’t blame them. Who wants to think about death? But if you’re trying to avoid common estate planning mistakes, it’s better to start thinking about it sooner rather than later.
In all honesty, the biggest estate planning mistake you can make is not doing any planning at all. However, even when you have thought about what will happen to your estate and put protections in place, there are still some obstacles that can trip you up. In fact, there is certainly no shortage of mistakes that people can—and do—make when planning for the futures of their estates and businesses. That’s why it’s so important to get professional help.
The following are some of the most common estate planning mistakes to avoid, but first:
What Is an Estate?
If we’re going to be talking about estate planning, we need to know what an estate is. You might think that an estate is something that only the wealthy have. The truth is so far from this misconception. To be clear, you don’t have to be a member of a country club to be able to benefit from an estate plan. That’s because everything that you own—jewelry, cars, your home, bank accounts—falls under the purview of your estate. So, to answer a question like, “I don’t have an estate. Do I actually need an estate plan?” we could say something like this: “Are you sure you don’t have an estate?”
Unless you own absolutely nothing, an estate plan can help you, and even if you don’t own any assets, it’s possible to benefit from an estate plan because an estate plan can also let you name someone you trust to take care of any medical decisions in the event you are unable to do so.
Now that we know what an estate encompasses and what an estate plan can do for you, let’s take a look at the biggest mistakes that people make.
Assuming You Have to Be Rich to Have One
One might assume that in order to have need of an estate plan that one need have a large mansion, a fleet of cars, and a business empire that spans several countries (i.e. the traditional trappings associated with Richie Rich and his ilk). The truth couldn’t be further from this picture.
Whether you’re a self-made business mogul or a small business owner, you have an estate that needs to be protected. Estate planning is for anyone and everyone who wants to know exactly what will happen to their business dealings, their family, their medical care, and their assets in the event they die or are incapacitated. It’s about peace of mind more than anything else.
Assuming Your Situation Is Too Simple
You might think that your situation doesn’t warrant an estate plan because your situation is too simple. You might consider joint ownership of property and bank accounts sufficient protection against life’s inevitabilities.
And you might be right. But you—or rather those who survive you—won’t know until it’s too late. Let’s say that you open a bank account with one of your adult children. Your circumstances dictate that you do this so you can both sign checks, perhaps for a business you run together. If you die without protections in place, that adult child will inherit the account, leaving any other children out of luck. If that’s not your intention, you need to make it known in your estate plan.
Procrastinating
Another of the most common estate planning mistakes is that many people want to create an estate plan, but then life keeps getting in the way. It’s always at the backs of their minds but never comes to realization.
A good way to self-motivate is to think about the stress that your family will have to deal with if you don’t put an estate plan in motion before passing away or losing your ability to make decisions. When something like that happens, you want your family to be able to mourn, or if you’re incapacitated, to focus on your health.
Forgetting about Your Digital Assets
Digital has been the way to go for some time now. Unfortunately, there is a lot that can get lost because there is simply no paper trail to follow. According to the Directive Communication Systems:
Today the average person in the U.S. has more than 130 digital and traditional accounts, and 93% of Americans do not know how these accounts will be managed. Digital assets include any online account that requires a login and a password such as email, online bill-pay, debits, shopping sites like Amazon, PayPal, eBay, and travel rewards as well as apps, subscriptions, podcasts, photographs and music libraries, and social media sites. Even health records are increasingly archived online. Digital assets also include all your devices such as computers, laptops, smartphones, tablets, e-readers and memory devices. Many computers automatically back-up data storage on the cloud, which may contain intellectual and sentimental property. Consider how emails have taken the place of letters and that many families archive memories, photographs, and more online. These accounts hold real value, and should be preserved. At best, failure to provide clear directives for all accounts can leave your estate vulnerable to fraud, your heirs subject to costly legal action, or other roadblocks in administering your estate.
Be sure to include a plan to transfer any passwords and important digital documents to your loved ones.
Want to avoid these and other common estate planning mistakes?
Do you have questions about starting the estate planning process so you can protect your family and your business? Want to review the estate plan you already have in place? Contact us today for a no obligation consultation. Se habla español. 305-851-2189