Common wisdom tells us we should learn from the mistakes of others. And, boy, when it comes to estate planning mistakes, there is plenty you can learn. Here are some of the most common estate planning pitfalls and steps you can take to avoid them.
Not Making an Estate Plan
There are many reasons people don’t make an estate plan. They think they’re too young, too healthy or don’t have the assets to warrant a plan. No matter your season of life or bank account balance, it is never too soon to start planning for what happens to your property and loved ones after you die. Because without a will, you are likely to cause undue stress on your loved ones. Plus, an estate plan involves more than writing a Last Will and Testament. Powers of Attorney, trusts and Advanced Health Care Directives are just some of the important aspects of estate planning that may affect you while you’re still alive.
Choosing the Wrong Executor
Choosing the right executor for your estate is one of the most fundamental decisions of estate planning. Your executor takes on a great deal of responsibility, so it’s vital to choose a person up to the task. While many people choose their spouse or oldest child to act as the executor out of convenience, these people may not always be the best choice. It’s impossible to know exactly how loved ones will handle their grief, but you should consider factors like personality, availability and financial knowledge when choosing an executor.
Some people opt for a third party, such as an attorney, to execute their estate. It will likely cost a small percentage of your estate, but it also removes a tremendous emotional burden from a friend or loved one after you pass.
Neglecting to Update Your Plan
Many people believe estate planning is something you do once, and you’re all set. It can be easy to let your estate plan fall “out of sight, out of mind” if it doesn’t change along with your life. Regularly reviewing your estate plan is important, but life events such as marriage, divorce, the birth or adoption of a child or significant asset changes should also trigger an estate plan review. Failing to update your estate plan after these life events could lead to someone receiving property you no longer want to bequest or accidentally disinheriting a loved one. Keep in mind retirement accounts and life insurance policies transfer to beneficiaries outside of a will, so you have to update beneficiary designations on those accounts separately.
Excluding the Digital
Thanks to the digital age, your assets are no longer limited to what you physically own. Your digital personas impact nearly every aspect of your life, even beyond your financial accounts. What do you want to happen with your social media accounts or digital subscriptions after you die? Do you have important financial or personal files on your computer? For the sake of estate planning, treat your digital life and assets just like material possessions. Making arrangements for your executor to gain access to relevant digital assets is another crucial part of estate planning frequently neglected.
Forgetting an Inventory of Assets
Even if you have all the right estate planning documents in place, they are of little use if your loved ones cannot find them. You can save your loved ones and executor the stress of trying to locate missing estate planning documents by including an inventory with the documents’ locations.
Relying on DIY
Digital services have made us obsessed with low-cost, DIY financial solutions, but estate planning deserves the expertise of a professional. With all the information readily available at your fingertips, why bother with consulting a financial advisor, you ask? Estate planning and execution are complex financial and legal services. Without consulting with an estate planning representative, you leave your legacy to chance. While there may be an initial cost upfront, consulting with an estate planning representative can save you or your family in the long run.
Contact a Fifth Third Bank financial advisor to start putting together your estate plan today.
Fifth Third Bank does not provide tax or legal advice. Please consult your tax adviser or attorney before making any decisions or taking any action based on this information. This information is provided for educational purposes only and does not constitute the rendering of tax or legal advice.
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