Estate planning is a crucial step in ensuring your assets are distributed according to your wishes after you pass away. However, many people make common mistakes that can lead to unintended consequences and complications for their loved ones. Here are some key estate planning mistakes to avoid to ensure your legacy is preserved and your family is protected.
1. Not Having a Will
One of the biggest mistakes is not having a will at all. Without a will, state laws will determine how your assets are distributed, which may not align with your wishes. A will is essential for directing who will inherit your property, who will take care of your minor children, and who will manage your estate.
How to Avoid:
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- Create a will as soon as possible, even if you think you don’t have significant assets.
- Review and update your will regularly or after major life events such as marriage, divorce, the birth of a child, or the death of a beneficiary.
2. Failing to Update Your Estate Plan
Life changes, and so should your estate plan. Many people create a will or trust and then forget about it, failing to update it as circumstances change. This can result in outdated information that doesn’t reflect your current wishes.
How to Avoid:
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- Review your estate plan annually.
- Update your documents after significant life events such as marriage, divorce, the birth of a child, or significant changes in your financial situation.
3. Overlooking Beneficiary Designations
Certain assets, such as life insurance policies, retirement accounts, and payable-on-death bank accounts, pass directly to beneficiaries named in those accounts, regardless of what your will states. Overlooking these beneficiary designations can lead to unintended beneficiaries receiving these assets.
How to Avoid:
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- Regularly review and update beneficiary designations to ensure they align with your current wishes.
- Ensure consistency between your beneficiary designations and your overall estate plan.
4. Not Considering Estate Taxes
Depending on the size of your estate, it may be subject to federal and state estate taxes, which can significantly reduce the amount your beneficiaries receive. Many people overlook these potential tax liabilities.
How to Avoid:
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- Consult with an estate planning attorney or tax advisor to understand the tax implications of your estate.
- Implement strategies such as gifting during your lifetime, setting up trusts, or charitable donations to minimize tax liabilities.
5. Ignoring Long-Term Care Planning
Many people do not consider the possibility of needing long-term care, which can deplete your estate quickly. Failing to plan for potential long-term care needs can leave your family financially burdened.
How to Avoid:
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- Explore long-term care insurance options.
- Consider Medicaid planning strategies with the help of an estate planning professional.
6. Not Planning for Incapacity
Estate planning is not just about what happens after you die; it’s also about planning for the possibility that you might become incapacitated and unable to manage your affairs.
How to Avoid:
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- Establish a durable power of attorney for financial and healthcare decisions.
- Create an advance healthcare directive (living will) to outline your wishes regarding medical treatment.
7. DIY Estate Planning
While it may be tempting to use online templates or do-it-yourself kits to save money, estate planning is complex and mistakes can be costly. DIY estate planning can result in documents that are not legally valid or do not fully address your needs.
How to Avoid:
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- Consult with an experienced estate planning attorney to ensure your documents are legally sound and tailored to your specific circumstances.
Avoiding these common estate planning mistakes can help ensure your wishes are honored and your loved ones are taken care of. Taking the time to create and maintain a comprehensive estate plan is a gift to your family that can prevent confusion, conflict, and financial hardship during an already difficult time. Remember, estate planning is not a one-time event but an ongoing process that needs regular attention and updates.
Let Jacobson Family Law be the attorneys you trust with your estate planning needs. Contact Jacobson Family Law to schedule your consultation with one of our Maryland estate planning attorneys today at 443-741-1147 or at by scheduling a consultation online.
