No one wants to think about his or her own death. It’s an unpleasant exercise. However, it may be too important to ignore, especially if you have children or other dependents who rely on you for support. That’s why estate planning is such a critical component of any comprehensive financial plan.
An estate plan is a set of documents that provide instructions to family, friends, business partners and other relevant parties. Your plan can be used to distribute assets, provide support for your loved ones or simply to minimize confusion and conflict.
Even if you already have an estate plan, it’s possible that you’ve overlooked important items. Below are a few estate planning mistakes that could lead to serious difficulties for your loved ones. If you haven’t addressed these issues, now may be the time to do so.
A will is one of the most effective estate planning tools you can use. It’s also one of the easiest to develop and implement. Unfortunately, nearly 60 percent of Americans don’t have a will.1
When you create your will, you provide specific guidance to your heirs and executor on how to distribute your assets. You may also use the will to dictate who should care for your minor children after you pass away. Wills are helpful because they minimize conflict and confusion in the weeks and months after your passing.
If you pass away without a will, your estate is considered intestate. When an estate is intestate, the probate court makes all decisions about asset distributions, child care and more. It’s possible that the court could make decisions that you wouldn’t make. Your heirs could also take legal action against one another to try to get the outcome they want. You can avoid this risk by working with an estate planning professional to create a will.
You probably have accounts that have beneficiary designations, such as IRAs, 401(k) plans, pensions, annuities and more. You can’t use a will to distribute accounts with beneficiary designations. Instead, the beneficiary simply fills out paperwork and receives the benefit directly.
This is an important distinction. If you have the incorrect person named as beneficiary on an account, they will likely receive the assets. For example, you may have inadvertently left a former spouse as the primary beneficiary on an old retirement plan. If you die, that spouse would receive the funds and your heirs would have little ability to correct the mistake.
Take time each year to review all your beneficiary designations and make sure they’re up to date. Also, if you have minor children, consider setting up a trust to serve as beneficiary on their behalf. Many life insurance companies and other institutions are reluctant to pay benefits directly to children.
No Plan for Incapacitation
Your estate plan isn’t just for managing your assets after you pass away. You can also use it to manage your assets and your health care in the final months or years before you pass away.
Many seniors suffer something called incapacitation. It’s the inability to make or communicate decisions regarding your finances and medical treatment. Incapacitation is usually caused by cognitive disorders such as Alzheimer’s or Parkinson’s. Incapacitation can put your estate at risk because someone else will have to make financial decisions on your behalf. They may make decisions you disagree with, or they may not act in your best interest.
You can create various documents to manage your affairs in the event you become incapacitated. For example, a living will provides specific end-of-life health care instructions to your doctors. A power of attorney establishes an individual as your decision-maker. Or you can even use a trust to set specific instructions on how your affairs and assets should be managed.
Ready to address the gaps in your estate plan? Let’s talk about it. Contact us today at Benefit Resource Partners. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
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