Contrary to popular belief, estate planning is not only for the wealthy. The reality is that just about everyone benefits by creating a solid estate plan. Those who fail to do so often find themselves facing unnecessary trouble.
When crafting your estate plan, you need to think of it as more than just a one-time effort. Certain life changes, such as a divorce, may give you a reason to update your plan. If you fail to do so and pass away unexpectedly, your loved ones could be the ones to pay the price. This is one of several estate planning errors that many people make. Recognizing exactly how others have erred may help you avoid making similar mistakes of your own. Other common estate planning errors include:
1. Failing to make an estate plan at all
Chances are, you worked hard to amass everything that you own, so you should have a say in what ultimately happens to your legacy once you pass on. If you fail to create a will, which is a surprisingly common practice, you die “intestate.” This means that the state gets to decide how to distribute your wealth.
2. Making trust-related errors
Establishing a revocable living trust offers several advantages, but many people make errors related to creating, funding or titling theirs. When you enter assets into such a trust, you must retitle or transfer ownership of them to the trust, itself, but many people fail to take this step. Failing to fund the trust at all is another common estate planning error.
3. Failing to consider tax implications
Many of the actions you take during estate planning have tax implications. Until recently, many people made trusts the beneficiaries of their IRAs because there were financial benefits associated with doing so. However, recent tax changes, and, more specifically, the passage of the SECURE Act, have changed how people benefit from making trusts the beneficiaries of their IRAs.
When you create an estate plan, you likely do so because you want to have the final say in what happens to your assets. Avoiding these errors may help ensure that this happens.