Perhaps you are nearing retirement and are thinking about putting together an estate plan. On the other hand, you may have created a will years ago but have not thought about it since.
No matter where you are in the process, here are five estate planning mistakes you will want to avoid.
- Incomplete planning, or no planning at all
If you have not done any sort of estate planning, there is no better time than now to begin. You at least need to have a will in place; otherwise, the probate court will take over and make decisions on asset distribution that you would not have approved during your lifetime.
- Not planning for disability
Healthcare statistics indicate that the majority of Americans aged 65 or older will require long-term care. While you are still employed, you should look into disability planning. Once retired, you will want to consider your options for long-term care planning.
- Underestimating the tax picture
Depending on the kind of assets you leave to your heirs, some will have unintended tax consequences. For example, the beneficiary of your 401(k) account may face the required minimum distribution (RMD) rule, which could impact his or her overall taxes.
- Failing to update retirement account beneficiaries
As to beneficiaries, you must make sure that the beneficiaries of your retirement accounts are current. If there has been a death or divorce in the family, you may need a replacement for the currently named beneficiary. While you are looking at this aspect of your estate planning, consider naming alternates to the primary beneficiaries. It is always advisable to have backups.
- Failing to update existing documents
Finally, if you prepared a will years ago, it is past time for an update. You may also wish to consider creating powers of attorney or perhaps a living trust.
No matter where you are in the estate planning process, seek legal guidance to help you take the next steps and ensure that you and your loved ones are well-protected.