Top 10 Estate Planning Mistakes

4. Not Updating Powers of Attorney

Powers of attorney allow you to designate a representative to make legal decisions on your behalf if you become unable to manage your own affairs. Failure to name or update your power of attorney could result in the court appointing someone who is not informed of your wishes to make your financial and medical decisions. This could lead to a time-consuming and costly legal matter.

5. Naming Minors as Direct Beneficiaries

If you name your minor child as a direct beneficiary in your will, he or she will receive full access to the specified assets at the age of 18 or 21 (depending on state laws), regardless of a trust provision. Consider creating a living or revocable trust in this scenario to safeguard your assets until your child can responsibly manage a large sum of money.  

6. Not Thinking Through a Well-Intended Gift

Even with good intentions, your gift to a beneficiary might not complement his or her future situation. Think about your beneficiaries’ lifestyles and how circumstances may change when creating your plan. Complex gifts can lead to lengthy and challenging legal processes for those involved.

7. Not Having a Residuary Clause

Including a residuary clause in your will guarantees that any assets in your estate not already designated to a specific beneficiary are distributed as you wish. It is most common to choose a single residuary beneficiary, such as a spouse. If you don’t have a residuary clause in place, the state will decide how to distribute remaining assets.

8. Failure to Prepare for Long-Term Care

During estate planning, it’s important to be realistic about the future need for long-term care services like Medicare and Medicaid, as well as nursing homes or in-home care assistance. Being cognizant of potential care costs and allocating assets specifically for this purpose will ensure that assets designated to your beneficiaries are not used for these expenses.  

9. Overlooking Tax Implications

Whether you designate your assets to a nonprofit, family member or other beneficiary, be aware of the different tax implications. Nonprofits can receive accounts such as retirement funds tax free, while beneficiaries unknowingly face double taxation.

10. Not Confronting Your Own Mortality

Death is an uncomfortable topic, but delaying proper planning to avoid the conversation may put your family at financial risk. Consult an adviser sooner rather than later to establish an error-free plan tailored to your needs and wishes.