3 common estate planning mistakes to avoid

On Behalf of | Jun 29, 2022 | Estate Planning

Many California adults have no estate plan, despite the fact that they probably need one. Even if you have very few assets, it’s usually better to have something on the record about how you want them to be distributed. Your estate plan can also explain your medical wishes and how you would like your finances to be managed in the event of your incapacity.

While you’re making your estate plan, remember to avoid these common mistakes:

Mistake #1: Forgetting to update beneficiary designations

Beneficiary designations are one of the simplest estate planning tools to update, yet many people forget to do so. Financial accounts with beneficiary designations will pass immediately to the beneficiaries and bypass the probate process.

If you have an outdated beneficiary designation listed on one of your financial accounts, don’t forget to update it. The contents of your checking or investment account could end up being passed to the wrong person, regardless of what is written in your will.

Mistake #2: Failing to consider probate and taxes

The probate process can be lengthy and expensive, which is why a lot of people decide to set up a trust. One of the biggest mistakes that people make when they create an estate plan is failing to consider how probate and tax laws will impact their beneficiaries. While there are upfront costs of creating trust funds, the cost could be worth it when you consider the tax savings.

Mistake #3: Unclear instructions

It’s important that you provide clear instructions in your estate plan so that your wishes are easy for everyone to understand. One of the ways that you can do this is by writing a letter of instruction to your named executor. If you make your instructions clear and concise, there is less chance of a messy will contest.

Update your estate plan regularly

Remember to update your estate plan every few years or after a major life change. If you had a new child, got married, got divorced or had a significant change in your financial portfolio, these are all perfect times to do so.