If you’ve decided that this is the year you will create an estate plan, then kudos to you. An estate plan provides peace of mind for you and your loved ones, knowing you’re prepared for the unexpected.
Unfortunately, there are many pitfalls when it comes to creating an estate plan. It’s important to know some of the most common mistakes and how you can avoid them.
1. Not updating your estate plan
An estate plan isn’t a “once and done” type of thing. Your life is a series of changes and your estate plan needs to reflect that. A marriage or divorce, the birth or adoption of a child, receiving an inheritance or starting a business are all significant life events that should trigger an estate plan review.
Even if nothing in your life changes, it’s still important to review your estate plan periodically due to changes in tax laws and regulations and to ensure it still reflects your wishes.
2. Forgetting about beneficiary designations
Not all of your assets are distributed based on your will. Life insurance policies, retirement investments and bank accounts often use beneficiary designations. Failing to update those designations can mean that an unintended individual, such as an ex-spouse, receives the proceeds of your life insurance policy after you pass away.
Part of your estate plan review should include a checklist of everything distributed via beneficiary designations. Ensure these assets go to the intended persons and the beneficiaries haven’t passed away.
3. DIY estate planning
You may think estate planning is easy and you can save money by doing it yourself. That approach may work for weekend projects, but it’s a different story regarding estate planning. Having professional guidance ensures that your estate plan is complete and comprehensive by ensuring it includes the following:
- A will
- Power of attorney
- Healthcare proxy
- Advance directives
- Guardians for any minor children or dependent adults
- Beneficiary designations
- A plan for your digital assets
They will also ensure that it is tax-efficient, such as using trusts or charitable giving to lower your taxable estate. Most of all, it’s crucial that your estate plan complies with Virginia’s laws.
