Do you have an estate plan? At first glance, it may seem like a fairly simple proposition. After all, a will addresses many estate planning challenges. If you have a will, you may feel like your estate plan is settled.
Unfortunately, nearly 60 percent of adults don’t have a will, according to a study from Caring.com.1 Even if you have a will, however, you and your heirs could still face estate planning challenges. Those issues could create significant costs and delays that impact your legacy.
Below are a few common estate planning mistakes and how to avoid them. Do any of these sound familiar? If so, now may be the time to talk to your financial professional and take action.
Incorrect BeneficiariesYou likely have accounts with beneficiary designations, like life insurance, annuities and qualified retirement plans. A beneficiary designation can be helpful because the death benefit is paid directly to your loved ones. The assets bypass probate altogether.
What happens if your beneficiary passes away before you? Most accounts allow you to name a contingent beneficiary who receives the benefit if your primary beneficiary isn’t available. If you fail to name a contingent, however, the benefit goes to your estate. That means it goes through probate, which could delay distribution and generate fees.
Minor Children as HeirsDo you want to leave a legacy for your young children or grandchildren? If so, you may be tempted to name them directly in your will or as beneficiaries on your account. That could create issues, though. Many courts and financial institutions won’t pay a benefit or inheritance directly to a child. The probate court may name a guardian to receive the money on the child’s behalf.
You can avoid this risk by creating a trust for the benefit of the children. In the trust document, you can state specific instructions for how the assets should be managed and distributed. That means the funds are put to use exactly as you wish, without involving courts, lawyers or other parties.
No Power of AttorneyEstate planning is all about the distribution of your assets after you pass away. However, estate planning isn’t just for what happens after you pass away. You can also use your estate strategy to plan for end-of-life issues.
One effective strategy is to name a trusted individual as your power of attorney. This gives that person the ability to make financial and health care decisions on your behalf in the event you become physically unable to do so. Your power of attorney can pay your bills, sell assets, make investment decisions and more.
If you don’t have a power of attorney and become incapacitated because of Alzheimer’s or another condition, you may have people making decisions that aren’t in your best interest. For example, individuals could make financial or health care decisions that go against your wishes.
Probate IssuesA will is a powerful estate planning tool, but it doesn’t cover everything. Even if you have a will, your estate will still have to go through probate, which is the legal process for settling an estate. It involves things like filing final tax returns, selling assets and notifying heirs. It can be costly and time-consuming.
Fortunately, you can use tools such as annuities, life insurance, trusts and more to minimize your estate’s exposure to probate. That could maximize the amount of your legacy and get your assets distributed to your heirs faster. A financial professional can help you develop a probate strategy.
Ready to bolster your estate plan? Let’s talk about it. Contact us today at Binversie and Associates. We can help you analyze your needs and create a plan. Let’s connect soon and start the conversation.
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