Estate planning is complex and very important, but many people put it off for far too long. Some never get around to making an estate plan at all, while others rush through it when they get older, or sudden injuries or disease make the need clear.
This type of approach can lead to mistakes. Unfortunately, those mistakes can make things far harder for your family. If you do not yet have an estate plan, it may be time to create one. If you have one, check it over to ensure there are no clear errors. A few examples of common mistakes include:
1. Picking the wrong executor
You may already know who you want to pick to be your estate's executor, despite having given it no thought. For instance, maybe you always assumed your oldest child would do it. Take your time and really think through the decision. Who has the right skills for the job? Who has time to do it? Picking the wrong person can lead to disputes between your heirs or avoidable mistakes.
2. Not adding a complete inventory of all assets
Never assume other people know where you kept everything. List out all assets, no matter how large or how small. Even if your instructions simply tell the children to divide minor assets up as they see fit, give them an inventory so they do not overlook anything. Include investment accounts, bank accounts, safety deposit boxes and much more.
3. Not handing over proper account information
These days, many accounts are handled online. In addition to giving your heirs account numbers for bank accounts, investment accounts, utilities and much more, leave behind a record of your passwords and usernames that you use online. Make it easy for them to answer emails, deactivate social media accounts, shut down recurring payments and the like.
4. Ignoring previous disputes between children
If your children already have ongoing disputes or cannot let go of old sibling rivalries, dividing your estate can grow contentious. Take this into account. Do not assume that they'll work it out because "they are adults now." This can land them in court. Create a plan that specifically addresses potential issues and works around them.
5. Paying unnecessary taxes
Carefully consider the tax implications of your estate. You want as much as possible to go to your children. For instance, if life insurance pays out into a trust, you do not pay taxes on it. If it counts as part of your estate and that estate is subject to estate taxes, then it may get taxed anyway.
Planning for the future
The key is to start planning in advance, carefully considering all of your options and legal rights to create the proper estate plan.