Estate planning may be the least appealing activity on your financial to-do list. After all, no one wants to think about their own mortality. There are statistics to back up this logic, according to Rocket Lawyer, 64% of Americans do not have a basic will.
In addition to the unappealing nature of planning your estate, there are many other reasons that Americans fail to have basic documents in place or to have the correct documents in place. A Forbes article titled “7 Common Estate-Planning Blunders Not To Make” discuses some of the most common errors that prevent successful estate planning and can lead to costly mistakes. Below is a description of these common mistakes and how to avoid them.
- Assuming estate planning is only for the wealthy. Somehow a misconception has developed that only those with large estates need an estate plan. This is simply not true. While the wealthy may need a more detailed or complex estate plan, nearly everyone over age 18 should have some basic estate planning documents in place. Estate planning is not limited to the distribution of assets at your death, it also includes planning for incapacitation or expressing your wishes regarding end of life care.
- Thinking your estate is too simple to require estate planning. This misconception is answered similarly to the first. No estate is too simple so that planning becomes unnecessary, in fact, your estate is probably not as simple as you think. For example, while putting your child’s name on a bank account may seem like a simple estate planning solution, but can lead to many unforeseen consequences.
- Because many don’t want to deal with estate planning, it often gets pushed aside. However, estate planning really is not something that should be pushed aside. In some instances, once estate planning documents become necessary, it may be too late to draft them.
- Forgetting digital assets. Nowadays, people have an online identity to include in their estate plan. Be sure to include a list of passwords and instructions for how you want your online accounts handled whether they should be deleted. Make sure all that information is available for your executor.
- Not preparing for “what ifs”. It would be nice if we could trust our loved ones to always make decisions with our best interests at heart. However, situations may arise that could drastically impact your estate plan. For example, a death in the family or divorce are all reasons to revise your estate plan.
- Forgetting your pets. When laying out your wishes, do not forget the specific “what if” scenario that you pass away before your pet. Designating a family member to care for the pet and setting aside money for them might be a good start and helps ensure that man’s (or woman’s) best friend can be taken care of.
- Failing to choose the right executor or trustee. Deciding who will be in charge of your affairs is not a decision to be taken lightly. Make sure you choose someone who is up to the task. This person should be responsible, organized and understand the importance of the task. Also, be sure to name a backup and don’t forget to amend your estate plan if your first choice shows themselves to be unfit for the task.