Estate planning is the process during which an individual decides who will own their wealth in the event of their death or incapacitation. This planning is vital for families as it reduces the legal burdens for the heirs and makes it easy to transfer wealth without having serious disagreements. Generally, estate planning involves the owner of the assets, trustees, and beneficiaries. While estate planning is easy, a lot of people make mistakes while at it. In this article, we will discuss the most common estate planning mistakes that people make so you can avoid them. These mistakes include:
Not having a solid plan.
One of the most repeated estate planning mistakes is not having a real plan in place. Everyone has some type of plan in mind on how they want their assets shared, but some fail to communicate this plan to the beneficiaries through the right path.
In the States, the laws of succession give the state power to determine where your wealth will go if you don’t have a will in place. Is that what you want?; The state and court decide who gets what when you already have a good plan in mind? To avoid getting to this stage, start planning your estate plan right away or if you have a plan but haven’t updated it in years, update it right now. Meet an estate and financial planner to help you with it. That way, should anything happen to you, everyone will know who gets what.
Not having a sit down with the beneficiaries
Sometimes unplanned things happen, and it becomes impossible to have a sit down with the family and other beneficiaries. But whenever possible, it is always smart to have a family sit down and discuss the contents of the will with them—making them know what to expect and providing a reason behind your decision is important and can help prevent fights in the future after you pass. If having a sit down is not an option because of family disagreements, you could include a part in the will that says whoever contests your decision could get written out of the will.
Failing to plan for long-term care or disability
In most cases, people above 65 years old usually require long-term care before they die. In the US, getting a private nursing room can cost you up to $100k, and staying in an average nursing home can cost you up to $50k a year. Failing to plan for this could turn out to be a huge problem because you cannot always predict how things will be in the future after you have given out all your wealth.
While at it, consider planning for disability by getting disability insurance to cater for you in an unfortunate event where you get disabled. Talk to a financial planner, and they will help you decide on disability insurance that best suits you. Discuss these plans as soon as possible because the more you wait, the more the prices go up.
Not planning for final arrangements
When you pass away, those you leave behind will be grieving, and things will be tough on them for losing a loved one. You can always make it easier for them by making the funeral arrangements yourself and stipulating exactly how you want it to be conducted. Think of the best way you would like you to be celebrated and the type of funeral you want and put it in writing so that your family can honor your wishes. Your family will respect your wishes, and it will ease their burden, struggling with grief and having to think about what you would have wanted for your funeral.
Not having liquidity
It is always wise to have asset liquidity, and it is even more important after death. In most cases, your estate will probably need to be split among the named beneficiaries and to make it easy, you will need to have enough amount of liquidity.
One of the best ways of getting creating asset liquidity is by having life insurance. The amount paid by the insurance can be used to split the wealth among the beneficiaries and even pay any debts you might have. If it is a business you own, having liquidity ensures that those who get the business have the cash they need to operate it even a few days after your death. Also, if the business needs to be sold or transferred, you will still need liquidity. Have a sit down with your financial advisors and determine the amount of liquidity you will need and what you should do to create it.
Not thinking about the future of your children
It is any parent’s wish to think that their children are smart enough to use the assets left to them wisely, but sometimes our children are too young to realize the seriousness of the future. If your loved ones are still in their early ages, you may want to include directions on how you want them to spend your assets when you are gone. Alternatively, you could have someone guide them until they are mature enough to use the assets wisely.
Asset planning is important, and one should start planning for it as soon as possible. While estate planning, you will need the help of several parties, including a financial advisor, an experienced lawyer, and contributions of the family members to avoid making the common mistakes we have discussed in this estate planning blog.