Top 3 Estate Planning Traps
The 3 most common estate planning traps people fall into and how to quickly resolve them.
The "Didn't Know" TrapToo many people are walking around thinking, "I don't need a Will because I don't have that much stuff." Or worse they may believe, "I've got everything jointly titled so I don't need a Will." So, why do you need one? Because it's your "stuff" that's left behind after you die. Do you really want your state to decide who gets those items? Most people don't like that idea, and neither do I. At a minimum, it's best to have a simple Will to make sure all your possessions are given to the people you want to receive them. This includes things you may not have today but will obtain in the future. For this reason, your Will should have a residual clause to take care of any items you didn't specifically gift, However, you still want to decide where those items go. So, take some time, hire a lawyer, make a Will and don't fall for the "Didn't Know" Trap!
The "Designation" TrapYour life savings (Checking Accounts, Saving Accounts, Pensions, IRAs, 401(k)s, Life Insurance Policies, etc.) WILL NOT necessarily pass via your estate plan (Last Will, Revocable Trust, etc.). So, what do you do to make sure your savings will go to the right people? Check and correct your beneficiary/contingent beneficiary designations on all contract arrangements wherein someone other than yourself can be chosen. Generally, the greatest snare here is leaving the beneficiary designation blank. If the owner dies without selecting a recipient, then it creates a need for probate. That means someone close to you will need to hire an attorney to open your estate and transfer the assets to your beneficiaries. A simple example of this trap is when one changes jobs, opens a 401(k), and yet they leave the beneficiary designations blank. Why? They might not have the information needed when they were filling out the paperwork. So, they think, "I'll go back and fill it out when I get their info." However, they never go back to correct the designation. If they die without naming a beneficiary, then even their spouse could have a difficult time transferring those assets to themselves. It's not about what you intended to do but what you did when it comes to beneficiary designations. So, don't fall in this trap - review and designate the beneficiaries you want today!
Check designations periodically and when major life events happen like death, divorce, disability, and/or departure.
The "Done" TrapSo you created your estate plan and checked "done" on that "to do" item. What trap is left? The "Done" trap, where you don't revisit your plan for a periodic review. Remember, life happens. Therefore, things will change and your circumstances may dictate an estate plan change. So save some administration headaches and review your plan every year. Simple changes now may cost a few dollars but in the long run it could save your loved ones a fortune!