As our Georgia readers know, it is often in the mistakes we make-and those we see others make-that we learn our most valuable lessons. When it comes to estate planning, this holds true. Many estate planning attorneys love to study substandard estate plans as a way of avoiding mistakes.
There are a number of ways an estate plan may be unsatisfactory, involving various mistakes or oversights. Other criticisms involve not so much mistakes, but taking unnecessary risks. One criticism that trumps all others is in not having a plan at all. It is with this point that we can begin looking at some common mistakes in estate planning.
It isn't clear how many Americans have no estate plan at all, but the number is surely too high. As our readers may already know, those who die without an estate plan will leave their estate to be distributed according to the intestacy laws of the state where they had their primary residence at death. Such laws vary from state to state. Because they are drawn up on a certain set up assumptions, they may or may not match one's desires. For those who have more complex family situations and relationships, these laws will probably be unsatisfactory. Obviously, it is much better to put even a simple estate plan in place.
Another preliminary issue is opting to set up one's own estate plan without the help of a professional. Increasing numbers of people are making use of internet documents or other programs that purport to help them set up a discounted estate plan. It is important to realize that, while the do-it-yourself approach will certainly save you some money initially, it is not recommended. Not only will one be more likely to make a critical mistake on the estate plan itself, one will likely not end up with a plan that is adequately suited to one's unique family situation and financial goals.
One mistake that sometimes is made in estate plans is to fail to make a complete review one's beneficiary designations and to ensure the proper titling of accounts. Over time, beneficiary designations may become outdated due to changed circumstances. It is extremely important to review these matters, since they will control the distribution of those assets. Estate planning should ensure that the right assets go to the right people.
In our next post, we'll continue with this topic and look at other common mistakes to avoid on one's estate plan.
Source: Forbes, "7 Major Errors In Estate Planning," Rob Clarfeld, April 25, 2012.